Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — SOCIAL SECURITY

The Secretary of State was asked—

Pensioner Poverty

Mr. Ernie Ross: What progress the Government are making in tackling poverty among pensioners. [115863]

The Secretary of State for Social Security (Mr. Alistair Darling ): As a result of Government policy, all pensioners will be £3 a week better off, and those aged over 75 will be £5 a week better off. On top of that, many will benefit from our tax changes. Because we are committed to tackling pensioner poverty, the poorest pensioners on the minimum income guarantee are £14 a week better off than they were under the previous Government, and those aged over 75 who are on the minimum income guarantee are £16 better off.

Mr. Ross: Can my right hon. Friend tell us how many retired people do not qualify for the full basic state pension—for example, people who were self-employed or many married women—and who therefore do not benefit from any increase? Does he understand how necessary it is that such people take up benefits and the minimum income guarantee?

Mr. Darling: My hon. Friend is quite right. It is frequently overlooked in discussions of pensions that many people—more than half a million—receive no basic pension because they do not have the required contributions. On top of that, some of the 2.7 million married women have full contributions, but many do not. The point of the minimum income guarantee is to address the problem that we inherited. Far too many pensioners—nearly 1 million single pensioners and 1 million pensioner couples—did not receive enough money to make ends meet. The minimum income guarantee is important to them, and some pensioners will be £16 a week better off because of it. During the final three days of last week, following the announcement of the minimum income guarantee freephone number, more than 11,500 pensioners called to ask for help.

Mr. Julian Brazier: What message does the Secretary of State believe that he is sending to the

next generation of pensioners—those people on modest incomes who are scrimping and saving for their retirement? The minimum income guarantee will be available to those who, for whatever reason, do not provide for themselves, but those who do provide for themselves, and achieve small pensions or savings, will find that they have no advantage.

Mr. Darling: I can say two things to such pensioners. First, my right hon. Friend the Chancellor has announced a doubling of capital limits that enable people to qualify for the minimum income guarantee, about which the hon. Gentleman has asked many questions. The capital limits were last raised in 1988—nothing was done about them during the last 10 years of the previous Government. We have doubled the limits, which will help.
Secondly, the pensioner credit, on which we shall consult in a few months, is designed to help pensioners who have not only a small amount of capital, but a modest occupational pension. We are determined to make sure that people who save and build up a pension are rewarded for their thrift, and not, as in the past, penalised for it.

Mr. Tony Benn: Does the Minister recall that the previous Labour Government linked pensions to earnings on the basis that the wealth we enjoyed had been built up by people who had retired? Does he recall that the Conservative Government abolished that link, costing pensioners more than £20 a week? Is he aware that millions of pensioners are frustrated, angry and—some of them—bitter that our moral obligation to them has not been met. Means-tested benefits are not the same as benefits as of right.

Mr. Darling: May I take this opportunity to wish my right hon. Friend the Member for Chesterfield (Mr. Benn) many happy returns of the day? He will look forward to receiving his free television licence in November.
I remember the previous Labour Government, although I was not in the House at the time. It is worth recalling that that Government increased pensions by the better of prices or earnings because inflation in the 1970s sometimes rose by 25 per cent. a year. In fact, the real-terms increase received by pensioners was negligible because of high inflation rates, which my right hon. Friend no doubt remembers well.
If my right hon. Friend considers what has happened over the past 25 years, he will see, in the pensioner income paper that I published last week, that we inherited a situation in which the incomes of better-off pensioners have gone up by 80 per cent. while the poorest pensioners have had increases of only 30 per cent. In the interests of fairness and equity, I should have thought that he would support the Government in doing the right thing by the oldest and poorer pensioners, who have benefited by as much as £16 a week that they would not have had but for this Government.
Of course, we are helping all pensioners—to the tune of about £3 a week this year, and £5 a week for those aged over 75—but it must be right, given what has happened over the past 25 years, to ensure that we help those who lost out so badly during the Tory years.

Mrs. Jacqui Lait: Does the right hon. Gentleman agree that divorced women form one of the


groups of women who could fall into poverty? What has happened to the regulations on pension sharing on divorce—all 122 pages of them—which were due to be laid by 30 March? We were promised that they would be passed by Easter, but so far nothing has happened. Does the right hon. Gentleman not agree that he needs to get on with that, so that that group of women are lifted out of poverty as soon as possible?

Mr. Darling: I would have more sympathy with the hon. Lady if her party had not opposed pension sharing on divorce when it was in government.

Mr. David Willetts: indicated dissent.

Mr. Darling: Well, the hon. Lady did, for the sake of the record. However, I can tell her that the regulations in relation to pension sharing and divorce will come into force in December of this year, as we promised.

Pension Entitlement

Mr. Nick St. Aubyn: If he will make a statement on the number of pensioners awaiting computation of their full pension entitlement. [115865]

The Minister of State, Department of Social Security (Mr. Jeff Rooker): As I said on 7 February, there were then about 83,000 people still to have their benefits reviewed following the NIRS2 problems. Some 17,000 of these have now been cleared, but the total number outstanding has increased to 88,000 as a result of further reviews produced from NIRS2 for existing awards to be revised and the continuing need to carry out clerical calculations for some new awards. So far, 48,000 claims have been cleared clerically and there are about 13,000 currently awaiting action. However, as I said in February, we still anticipate that all payments will be fully brought up to date before the end of the year.

Mr. St. Aubyn: We are all holding our breath to see whether the Minister can deliver on that commitment, given that it is now 18 months since the Secretary of State told us that the matter would be cleared up within a matter of weeks. I have a constituent, who wrote to me only this week, who retired as head teacher of a special school last summer and, nine months later, is still waiting to have her pension entitlement sorted out.
Is it not a disgrace that a Government cannot even authorise that the Benefits Agency pay pensioners their projected benefits, which they were told that they could expect when they retired, until such time as the exact figure can be sorted out?

Hon. Members: Hear, hear.

Mr. Rooker: Conservative Members can say all the hear, hears they like. The hon. Gentleman has raised the matter several times, as have other hon. Members, and he is quite right to do so, but the answer is the same. We are reliant upon a computerised system. That new product was purchased on the cheap by the previous Government. It does not do the job that it was intended to do—hence the delay, and hence so far we have paid out £2.5 million in compensation for late payment of people's pensions.

Asylum Seekers

Mr. Nigel Evans: How much was spent on benefits for asylum seekers in (a) 1996–97, (b) 1997–98, (c) 1998–99 and (d) 1999–2000 to date. [115867]

The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley): The estimated annual expenditure for asylum seekers was approximately £400 million in 1996–97, falling to £305 million in 1997–98 and falling again to £285 million in 1998–99.
A final estimate is not yet available for 1999–2000.

Mr. Evans: But we know that the figure will be higher. Is it not true that the measures that the Government are taking today, with the launch of a voucher scheme, are just a knee-jerk panic reaction to a situation that has gone completely out of control under the present Government? Is it not true that there has been an influx of bogus asylum seekers into this country, leeching off the British taxpayer and genuine claimants? Is it not true that Britain is now seen as a soft-touch magnet for economic migrants throughout the world, and that the Government need to get a grip on the situation?
It would be far better if, instead of trying to fuel the fire with alternative means such as vouchers, the Government introduced mechanisms now which stopped the tide of economic migrants coming into this country in the first place.

Mr. Bayley: Those who listen to today's events on "Yesterday in Parliament" will miss the look of shock and surprise on the hon. Gentleman's face when he learned that social security expenditure on asylum seekers has fallen year on year under this Government.

Mr. Evans: What about the council tax?

Mr. Bayley: The hon. Gentleman's complaints about the council tax would have more credibility if his party had not opposed every one of the measures that our party has introduced that have had that effect on social security spending.

Mr. David Winnick: My hon. Friend is perfectly right. It is obvious that the hon. Member for Ribble Valley (Mr. Evans) was totally surprised by the answer that he received. Does my hon. Friend agree that, although there is no doubt that bogus asylum seekers should be dealt with quickly, the hon. Gentleman expressed quite clearly the racism and xenophobia of many Tory Members who are deliberately whipping up feelings about asylum seekers? The very same Tory Members have never shown the slightest interest in working and retired people in this country.

Mr. Bayley: Yes, I agree with my hon. Friend. The nub of the problem is that the number of asylum seekers banked up waiting for decisions to be taken on their cases increased under the Conservatives and the time that it took to resolve their cases and to decide whether asylum should be granted lengthened. Our policies are reducing the time that it takes for such decisions to be made. In the latest figures for February this year, there were 6,110 new


applications for asylum, but 7,840 decisions. We are reducing the total, which is something the Conservatives did not manage to do.

Mr. Peter Lilley: Can the Minister confirm that the figures for expenditure that he has just given do not include support provided by local authorities? Will he also confirm that the majority of those claiming benefit as asylum seekers entered this country claiming to have come here on business, for tourism or to stay with relatives? To do that, they had to convince the visa and immigration authorities that they had the means to support themselves and to return home. What will the Minister do to hold them to their word rather than allow them to be supported by the taxpayer?

Mr. Bayley: I have to ask the right hon. Gentleman why the Conservative party opposed the £2,000 fine on lorry drivers bringing people into this country. If he is serious about reducing the number of economic migrants coming into the country—

Mr. Lilley: Answer the question.

Mr. Bayley: In answer to the question, I say to the right hon. Gentleman that he will recall from his time as Secretary of State for Social Security that decisions taken by the Home Office on the administration of immigration and asylum matters meant that people were banked up for months and years while decisions were taken and expenditure was offloaded from the Home Office on to his Department. We are ensuring that expenditure takes place under the control of the Home Office, so that it has incentives for, and gains the benefits of, speeding up the decision-making process.

Benefits (Post Offices)

Mr. Harry Barnes: What arrangements will be made for the establishment of bank or building society accounts under the automatic credit transfer system for those who wish to continue to cash their benefits at post offices. [115869]

The Secretary of State for Social Security (Mr. Alistair Darling): We want banks and the Post Office to offer banking services to people currently without bank accounts. We have already begun discussions with the banking industry on issues surrounding benefit recipients, charges and others matters, and discussions with the industry will continue. We have also made it clear in the past—I do so again—that people will still be able to collect their cash at post offices, both before and after the move to paying benefits by ACT begins in 2003.

Mr. Barnes: I realise that if pensioners take out accounts with certain building societies and banks, they will still be allowed to cash their benefits directly at post offices. The problem, however, is how they will be able to register. To establish accounts, will they have to search out a bank, turn up and take a great deal of paraphernalia with them to show who they are, or will there be provisions through the Post Office itself to make it automatic and easy for them to set up accounts? If it is

easy for them to set up accounts, they will continue to use the Post Office and it will remain the only organisation that they use.

Mr. Darling: My hon. Friend may be aware that almost half the new pensioners receiving their pensions now choose to have their money paid directly into their bank accounts. I do not think that there is an overwhelming obstacle against that. However, regardless of whether people receive their money from a bank account or from a post office, some formalities have to be followed because we need to be sure that the money is paid to the right person. As I said, we are in discussions with the Post Office and the Post Office will, in turn, discuss with the banks the formalities that are necessary. We want to make it as easy for people to be able to receive their pensions and other benefits provided that that is consistent with ensuring that the system is secure. That benefits individuals as well as the system as a whole.

Mr. Steve Webb: Will the Secretary of State confirm that since his Government came to office, the rate of post office closures has accelerated and that this year looks to be the worst ever? Will he confirm that the move to ACT will undermine post offices? What steps is he planning to take to enable those pensioners who want to exercise the choice of going to the post office to do so? They will be unable to do so if post offices are closing all around them.

Mr. Darling: The hon. Gentleman has to accept that if we do nothing, as the Liberal Democrats advocate, more and more post offices will close because almost half the people coming into the system are opting to have their money paid into a bank or building society account. We are ensuring that the Post Office has the investment to set up banking facilities, which did not happen when the Conservatives were in power, to ensure that post offices can compete with banks and building societies.
The Liberals are being completely dishonest about their position and raising fears although they have no suggestions for securing the future of the Post Office. We are determined that the Post Office will have a future, so we are giving it the investment necessary to ensure that there is a network in years to come—something that the Liberal policy, whatever it happens to be from day to day and hour to hour, could never ensure.

Mr. Simon Thomas: May I assure the Secretary of State that the concerns to which he refers are genuine concerns in a constituency such as mine? Will he consider another type of bank account, which could prove to be a valuable way to deliver not only ACT but the Government's social exclusion strategies? I refer to the credit union method—a third way, if he likes. Will he ensure that, in his discussions with the Post Office and the banks, credit unions are not closed out? If he has any doubts about the ability of the credit union movement to deliver a highly secure system, he can look to Ireland, where millions of pounds are held in credit unions. Will he consider that as an alternative way of building communities and delivering social security payments?

Mr. Darling: The hon. Gentleman makes a good point, and credit unions are popular. They are not as well developed in this country as they are in others, but some are successful and well supported. He latches on to the important point that it must be in the whole country's interests to ensure that as many people as possible are included in the banking system, rather than having a section of society that is completely excluded from that system.
The object of our reforms is to take account of the fact that people are choosing to receive their benefits in different ways, and choice ought to be supported, but at the same time we want to ensure that the Post Office and other institutions have the means to receive those payments so that they can pay them out to members of the public. It is precisely because we are facing up to the problems that we inherited of years of under-investment, indifference and neglect that we can ensure that there will be a post office network in future.

Mr. Frank Roy: In my constituency, 80 per cent. of post offices depend on the Benefits Agency for over 50 per cent. of their business. Will my right hon. Friend confirm that when ACT is introduced those who receive their money through the bank will be able to go to a post office to collect their money? People who do not use a post office at present may therefore start to use it, which would help post offices.

Mr. Darling: The object is to make sure that people have a choice as to where they receive their money. I repeat that it behaves all those who oppose the Government's proposal to come up with an alternative that will work. The Liberals and Conservatives are now saying, opportunistically, that they would do absolutely nothing, which would mean that more and more people would ask to have their money paid into their bank account, and more and more post offices would close. We are ensuring that people have a choice, because we believe that people should be allowed to choose where they receive their pension or their benefit, and at the same time we are giving the Post Office the additional investment that it needs to ensure that there will be a viable network in future.

Mr. Tim Boswell: Pensioners account for a significant number of the 8 million disabled people in this country, and many of them suffer from mobility problems while others find administrative procedures increasingly perplexing. In the light of that, will the Secretary of State give the House an absolute and unequivocal assurance that those who want to receive their pension in cash at the post office will be able to do so? Furthermore, and in the spirit of that pledge, will he assure the House that there will be a network of post offices that are reasonably convenient for those people, where they will be able to draw that pension?

Mr. Darling: I remember that, during the previous Parliament, the Conservatives tried to sell off the entire postal network, which would not have enabled such guarantees to be given. My colleagues and I have made it clear that people will have a choice as to whether they receive their benefits and pensions at a post office or in a bank account. I should have thought that those who are disabled and unable to go out would quite like their money to be paid into a bank account, instead of their having to queue up at a post office to get it.

Retirement Provision

Mrs. Sylvia Heal: What steps he is taking to help low-paid people to provide for their retirement. [115870]

The Minister of State, Department of Social Security (Mr. Jeff Rooker): The state second pension will help low and moderate earners to build up increased pension entitlement. Low earners—by which we generally mean those earning less than £9,500 this year—will receive a dramatic boost to their additional pension entitlement; under the state second pension, that will be more than double their entitlement under the current system. In addition, carers and long-term disabled people with broken work records will, for the first time, be able to build up a second pension.
The state second pension will help 18 million people to build bigger pension entitlements. Those people include 4.5 million low earners, 9.5 million moderate earners and 4 million carers and disabled people with broken work records. That is something in which the Government and those sitting on the Benches behind me can take extreme pride.

Mrs. Heal: Does my right hon. Friend acknowledge that one of the problems with SERPS is that it provides least to those who earn least? Is he aware that many of those low-paid people are women in low-paid, part-time jobs? Will he assure me that the Government's proposed state second pension will ensure that such women will have access to a decent state pension in their retirement?

Mr. Rooker: Yes. Most part-time workers and low-paid workers are women. To someone earning £9,500 this year—the upper limit of the low-earners category—the state second pension will be worth double the sum that SERPS currently pays. SERPS was and is good: it delivers excellent pensions to those retiring today, despite the fact that in 1986 and 1995, the Conservative Government cut into it. However, because SERPS is earnings related, it gives least to low earners; the state second pension will correct that.

Mr. David Willetts: May I remind the right hon. Gentleman of the document on which he fought the last election—the Labour manifesto? It states:
Labour will retain Serps as an option for those who wish to remain within it.
The proposals are clearly a breach of that manifesto. The Minister claims that everyone will be better off under the state second pension, but he must know that certain groups—those caring for children aged six to 16, who will not receive the promised home responsibilities protection; people with earnings from self-employment and employment; and people in receipt of working families tax credit—will lose out as a result of the changes that he is introducing. He is clearly in breach of his manifesto promise and is clearly disadvantaging many people as a result.

Mr. Rooker: I note that the hon. Gentleman does not deny the fact that there will be 18 million gainers under the state second pension. Nobody earning up to £20,000 a year will lose—that cannot be contradicted. He claims


that we are abolishing SERPS, but we are not; we are reforming it, and using SERPS legislation to introduce the state second pension—[Interruption.] If the Liberal Democrats had deigned to attend the Standing Committee on the Child Support, Pensions and Social Security Bill instead of holding themselves remote from it, they would know that SERPS legislation is being amended and reformed to introduce the state second pension.
As for the remarks of the hon. Member for Havant (Mr. Willetts), we have been consistent with our manifesto commitment: even when the state second pension becomes flat rate, as it will after a number of years, the contracted-out rebates will be earnings related and will go toward the second pension of the people involved. To that extent, we are fulfilling our commitment.

Dr. Lynne Jones: In 1980, the basic state pension was worth 23 per cent. of average earnings. According to Government figures, by 2051 the combination of what is left of the basic state pension and the new state second pension will be about 21 per cent. of average earnings. It will be set by the Government at about £85 a week at 1999 figures. The figures suggest that there will be more pensioners reliant on means-tested benefits. Does my right hon. Friend consider that that is a satisfactory aim for pension reform by the middle of the 21st century in one of the richest countries in the world?

Mr. Rooker: If we do nothing and abandon the pensions reform package, one in three pensioners will retire straight on to the means test in the middle of the century. With the package of reforms of the stakeholder pension, the state second pension and other changes, we can reduce that ratio to one in five. I know that the number of pensioners will increase from nearly 11 million to nearer 15 million, but we want to keep pensioners off the means test. We do not want a system that automatically puts millions of people on to it. We have not quite reached the stage where we can say that our package will eradicate the means test, but we shall be on our way in that direction.

Capital Thresholds

Mr. David Heath: What plans he has to adjust capital thresholds for social security benefits. [115871]

The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley): We have delivered on the pledge in our pensions Green Paper better to reward savers with low incomes. From next April we will increase the capital limits for pensioners to £6,000 and £12,000.

Mr. Heath: I welcome the Budget announcement, but is there not a case in logic and in justice for automatic uprating across all benefits where a capital limit applies? If it were necessary to disparage the actions of the previous Government—a view which I share—in not increasing limits for the poorest pensioners, why was it necessary to wait for this Budget for an increase to be put in place, and why will that increase not apply for yet another year?

Mr. Bayley: I do not need to remind the hon. Gentleman that this year his party voted against all the

social security up ratings, including those for pensioners. In answer to his specific question, I do not think that automatic up ratings would be a good idea. I welcome strongly the fact that half a million pensioners who missed out in the past on the minimum income guarantee will become eligible for it as a result of our decision to raise capital limits.

Mr. Frank Field: I welcome the Government's announcement to raise capital limits. It is welcomed on both sides of the House and by the country as a whole. However, does my hon. Friend accept that even with the changes that have been announced there will be many pensioners who have saved and other pensioners who have small occupational pensions who will not be eligible for the minimum income guarantee? Would it not be possible to change the rules for qualifying for MIG so that the criterion is not whether an individual qualifies for income support but whether his pensionable income is below the minimum income guarantee, when it would be brought up to that level?

Mr. Bayley: My right hon. Friend will be aware that in the longer term, through the pension credit, we shall be considering this issue.

Mr. Field: What about now?

Mr. Bayley: Now, or in April next year, we shall be dramatically improving the situation for half a million pensioners. That is something for which hon. Members on both sides of the House have called. It is something that we said we would consider in our pensions Green Paper, and we have done so, and it is something which my right hon. Friend the Chancellor of the Exchequer acted on in his Budget.

Mr. Edward Leigh: May I ask a supplementary question to the question posed by the right hon. Member for Birkenhead (Mr. Field)? I remind the Minister that recently the right hon. Gentleman said:
As more and more people in work on low wages realise the futility of saving when every penny is taken from the Minimum Income Guarantee which is gained by people with little or no savings, fewer and fewer people on low income will save.
Is that statement not a devastating critique of the minimum income guarantee? Is it not true that the Minister has no answer to the criticism levelled at his policy by the right hon. Gentleman?

Mr. Bayley: I do not need to remind the hon. Gentleman that his party left the capital limits unaltered for a 10-year period, and we are doubling them. The Government's approach is to target additional resources on those pensioners who need help most—the poorest pensioners. That is what we are doing through the minimum income guarantee. We realised that there was a problem for pensioners with small savings, and that problem has been addressed by the change announced by the Chancellor.

Mr. Michael Jabez Foster: May I tell my hon. Friend how welcome the increase has been to some of my constituents in Hastings and Rye? However, a problem has arisen. A lady who wrote in last week, and who qualifies, received a form headed "income support".


She said that that was nothing to do with her. May I ask my hon. Friend to change the name to supplementary pension or something other than income support? His campaign to change the system is great, but there must be a change of terminology.

Mr. Bayley: I understand the point that my hon. Friend makes. We are, of course, bound by statute, which refers to income support, but it is important to get the message across to pensioners that the minimum income guarantee is an entitlement. It is not charity; it has been paid for by their own and their spouses' national insurance contributions throughout their life. We will, as my hon. Friend knows, shortly be taking forward the take-up campaign with television advertising. I can assure him that the minimum income guarantee will get a plug in that advertising; we want to get it into everyday currency. We want to get pensioners talking about the minimum income guarantee, and claiming it as well.

Benefit Fraud

Mr. Andrew Robathan: What assessment he has made of the impact of the provisions of the Human Rights Act 1998 regarding surveillance on his measures to combat benefit fraud. [115872]

The Minister of State, Department of Social Security (Mr. Jeff Rooker): The Department is working with the Home Office on the Regulation of Investigatory Powers Bill, which is currently before the House. That will give greater assurance that my Department's surveillance activities comply with the Act.

Mr. Robathan: We hear a lot about joined-up government, but the Human Rights Act 1998 is another classic example of disjointed government. Two weeks ago, my office was told by a Benefits Agency official that the agency could no longer keep people under surveillance without their permission. I have checked the Benefits Agency's code of practice. The official was not quite right; I do not blame her—she was confused, as are many people. The code of practice states that officers must get written authorisation for surveillance operations, even in public places. Does the Minister agree that that is hampering the fraud investigations of the Benefits Agency? It is creating more paperwork, hampering the police and Customs too, and wasting their time. Does he further agree that the Human Rights Act will help only the criminals, whom we all want to see unable to defraud the Benefits Agency or rob the taxpayer?

Mr. Rooker: I have not heard it argued by the Opposition that we should unincorporate the European convention on human rights from our legislation.

Mr. Robathan: We voted against it.

Mr. Rooker: We have not heard an argument for a repeal—[Interruption.] That is a fair point. The legislation will be important. If the Opposition are intent on committing themselves to repealing it, they should say so.
The hon. Gentleman's first point is valid, and misunderstandings do arise. Most of the observations carried out by officers of my Department take place in public places. They require authorisation from their superiors.

Mr. Ian Davidson: If my right hon. Friend is experiencing difficulty with the Human Rights Act, may I urge him to ensure that instead of investigations being suspended, they are channelled into other areas? In particular, forensic accountants should be employed to look into landlord fraud. The Human Rights Act would have no impact on that activity, and the Department could continue the pursuit of fraud, bringing many of the big criminals to justice instead of chasing small fry.

Mr. Rooker: We are chasing small fry and big fry, including collusive employers and collusive landlords.

Mr. David Willetts: Let us see whether the Minister of State can defend his manifesto a little better this time. It states:
We will start with a clampdown on Housing Benefit fraud, estimated to cost £2 billion a year.
Is he aware that the Audit Commission has shown that detected housing benefit fraud was £95 million in 1998–99? That is one twentieth of the figure that Labour undertook to tackle. It is not a very good start, is it? What does the Minister of State intend to do to deliver on his manifesto promise, or is this something else that he will do only to some extent?

Mr. Rooker: The benefits fraud inspectorate will inspect the 30 authorities that spend most on housing benefit in this country. The top 30 authorities in this country spend 30 per cent. of the £12 billion of housing benefit on checking their systems and finding out whether they are secure. Another 40 authorities will subsequently be inspected. The reports are published so that we can learn from good practice.
We must consider the effects of the Royal Mail "do not redirect" scheme. More than half our local authorities have signed up to that. Giro drops and so on were a way of ripping off housing benefit. Every local authority has remote access terminals; local authority staff can now get into Department of Social Security computers.
We are joining up the benefits system. That is the best way to stop fraud, including council tax benefit and housing benefit fraud. Although local authorities deliver those benefits, they are provided through central Government funds.

State Pension

Ms Oona King: If he will make a statement on the uprating of the state pension. [115874]

The Secretary of State for Social Security (Mr. Alistair Darling): We are supporting all pensioners by uprating the state pension; we are giving free television licences to those aged 75 and over from November, and we are increasing the winter fuel payments again, to £150. To tackle pensioner poverty, we are increasing the


minimum income guarantee, and doubling the lower capital limit to £6,000 and the upper capital limit to £12,000, to ensure that those with modest savings do not lose out. That measure alone means that the poorest pensioners are some £5 a week better off.

Ms King: I thank the Secretary of State for that reply. I am sure that all Labour Members welcome the Government's good work, especially the commitment to raising the minimum income guarantee in line with earnings next year.
On the subject of pensioners who do not qualify for the minimum income guarantee and rely on the basic state pension, will the Secretary of State consider amending the retail prices index so that the formula takes account of the rent increases of pensioners who are council tenants and registered fair rent tenants?

Mr. Darling: My hon. Friend is right to draw attention to the fact that in many parts of the country—sadly, especially in her constituency—many pensioners were not able to accumulate enough money for a pension during their working lives. As a result of the Government's measures, all pensioners will gain about £3 a week and the over-75s some £5 a week. Unfortunately, Tower Hamlets has many of the poorest pensioners. They will be £14 a week better off through the measures that we have introduced.
There is a problem with trying to find an index whereby the basic state pension can be increased and my hon. Friend's anxieties for pensioners can be taken into account. The costs that they face are different in different parts of the country. The basic state pension is paid universally throughout the country. I am therefore not sure whether seeking such an index is right. However, I repeat the points that I made to my right hon. Friend the Member for Chesterfield (Mr. Benn) earlier: in the past 20 years, pensioner income inequality has grown; as a result of what that lot over there did, it is now the same as it was in 1961. We are determined to ensure that we help all pensioners, especially those who are poorest and who lost out most in the past 20 years.

Child Support Agency

Mr. Simon Burns: If he will make a statement on the reform of the Child Support Agency. [R][115875]

Mr. Desmond Swayne: If he will set out a timetable for implementing the reforms of the Child Support Agency currently before the House. [115881]

Mr. Michael Fabricant: If he will make a statement about the timetable for the implementation of his proposed changes to the Child Support Agency. [115883]

The Parliamentary Under-Secretary of State for Social Security (Angela Eagle): We are on course to introduce the new system for new cases by April 2002.

Mr. Burns: Does the Minister realise that the possible attractions of a simplified child support system will be undermined by the creation of a new injustice, owing to

the system's potential rigidity? Does she accept that, in places such as Chelmsford, the home counties and London, the costs of travelling to work and housing are significantly higher than in other parts of the country? Will the Minister consider changing the variations to take into account housing and travel-to-work costs, so as not to undermine the improvement of the system through simplified methodology?

Angela Eagle: No; we believe that one has to choose between the complex system, which includes the departure scheme and the hundred bits of information that have to be gathered before an assessment can be made, and a simple system which can be easily administered and whereby an assessment can be made in weeks instead of the months that it currently takes. The hon. Gentleman's proposal would risk a reintroduction of all the complications of the current system and of making child support reform ineffective.

Mr. Swayne: Because there is no means of delivering payments directly to the child, an impression may grow that the absent parent is subsidising the life style of the parent with care. If the absent parent's income is modest and that of the parent with care relatively high, that may give rise to a burning sense of grievance which will undermine compliance. What plans has the Minister to address that problem?

Angela Eagle: Fewer than 200 parents with care in the current child support case load earn more than £500 a week so the hon. Gentleman is worried about something that will affect almost nobody. Nearly 700,000 parents with care have no income at all, although they look after the children. We have to put the system right so that we can help to end child poverty; and we know that up to 1 million children will gain from the reforms.

Mr. Fabricant: How can the Minister guarantee that she will not be blown off course? She well knows that there have been continual computer problems in her Department. Indeed, the Minister of State blamed not only the previous Government, as this Government always seem to do, but the computers. Is she not aware that there have been problems with the NIRS2 programme? Is she not aware, either, that there have been problems with making winter fuel payments? Those are all computer problems. When will she accept that bad workmen always blame their tools—or computers in this case—and when will the Government accept the computer maxim "garbage in, garbage out"?

Angela Eagle: That was the biggest pile of garbage that I have heard for a long time, and the hon. Gentleman should consider the legacy that his Government left us. When the Child Support Agency was introduced, they were to have a bespoke, specially designed computer system, but they decided it was too expensive. They bought a cheap, off-the-shelf system from Florida that cannot even recognise national insurance numbers. It cannot do a whole load of other things—I shall not bore the House with them—and it is a miracle that any child support has been collected with the pile of rubbish bought by the Conservative party.

Ms Sandra Osborne: I welcome the reform of the CSA, which we all know is much needed, but how


will the Minister ensure that parents with care can opt out of child support action when there is a risk of domestic violence?

Angela Eagle: The "good cause" parts of the new Bill will ensure that child support does not have to be pursued if a parent with care has any worries that she will be subject to violent threat by a violent partner. However, I can tell my hon. Friend that 70 per cent. of parents with care were trying to opt out of pursuing the non-resident parent for maintenance when we inherited the CSA from the Conservative party. We have got that down to 15 per cent. by better working with the Benefits Agency and the CSA to reassure women that they will get the money.
Under the new scheme, there will be a positive incentive for both the non-resident parent and the parent with care to pay. The child maintenance premium will ensure that £10 extra goes to the family looking after the child, and the non-resident parent will be well aware that his money supports his child and does not go back to the Treasury.

Mr. Peter L. Pike: My hon. Friend will know that there are a wide variety of problems with the CSA. Can she give some idea of when those who are already in the CSA system will have their assessments re-examined and brought into line with the new system?

Angela Eagle: The transition is one of the most difficult parts of the reform for everybody to organise. We estimate that there will be 1 million cases to transfer by the time the new system is introduced, in 2002. That will be done in a timely fashion, but people will have to bear with us. It cannot be done in a great big bang, but we shall ensure that the transition is as brief as possible.

Mr. Desmond Browne: Will my hon. Friend resist the temptation to introduce any more complexity? Many hundreds of thousands of women out there are being defeated in their child maintenance claims by men—absent parents—who have reconstructed their financial circumstances to suit the departures and complications that the previous Government put into the system.

Angela Eagle: I wholeheartedly agree with my hon. Friend. That is why I resisted the suggestions of the hon. Member for West Chelmsford (Mr. Burns).

Mr. Eric Pickles: With respect, surely that answer is wrong. The Minister has repeated four times that the simplified system will make matters better. Does she not understand that there will be a great deal of argument over the income of the non-resident parent, especially the calculation of his net income? Will she answer the question that hon. Members from both sides of the House posed to her last Wednesday, but which she refused to answer? Will she give an undertaking that if, in making those calculations, the Child Support Agency makes a mistake—through no fault of the non-resident parent—the CSA will not look to the non-resident parent for backdated payments?

Angela Eagle: We hope that the new system will make maintenance calculations in four to six weeks, rather than the six months that it currently takes, so there will be a

lot fewer problems with arrears. The problem that the hon. Gentleman fears should not arise. We have a clear formula for establishing net income, and it should be much simpler to work with.

State Pension

Mr. David Amess: What recent representations he has received about the level of the state pension. [115877]

The Minister of State, Department of Social Security (Mr. Jeff Rooker): Since January, we have received about 2,000 further letters that mention the level of the state pension, some of which raise other issues as well. We record only the subject of the letter. In addition to letters, we receive representations in this place. Two weeks ago the Government organised a three-hour debate on pensions reform in Westminster Hall, which was attended by one Back Bencher, who happened to be a Labour Member.

Mr. Amess: Is the Minister aware that he is about to receive thousands of letters from senior citizens who regard the 75p increase as an absolute disgrace? Does he remember sitting on the Labour Opposition Benches and castigating the Conservative Government on their treatment of senior citizens? Will he now admit that the Labour Government have misled senior citizens about the state pension? What does he intend to do about giving them back a decent standard of living?

Mr. Rooker: We will tell the truth, for a start. We shall reply to all the letters that we receive, but I hope that the hon. Gentleman will tell his constituents, as other hon. Members do, that in the first three years of this Parliament pensioners as a whole will have received £800 million more, through the winter fuel payments and the minimum income guarantee, than they would have received through the earnings up rating of the basic pension. The policy we are operating is the policy that we were elected on, which was to raise the basic state pension at least in line with earnings—the same policy as the one on which the Conservative party and the Liberal Democrats were elected.

Hon. Members: Prices?

Mr. Lindsay Hoyle: Obviously we welcome what the Government have done for pensioners to ease their plight following 18 years of neglect. I have talked to many pensioners in my constituency, and their need is for an increase in the basic state pension. Through my right hon. Friend's discussions at No. 11, will he ensure that there is a substantial increase in the state pension in the future?

Mr. Rooker: When I answered the previous question, my mind was concentrating on the minimum income guarantee, which increases in line with earnings. I referred to the basic state pension rising in line with earnings, but I meant prices, as everyone in the House understood—except me. I was carried away with the success of our minimum income guarantee take-up campaign.
People will campaign on the basic state pension, but 20 years ago most people had no second pension. The only fair comparison to make is with total pensioner incomes. Currently, the average for a single person is £132 a week and it is £248 a week for a couple. Net housing costs come out of that. That is double the basic state pension, and is born out of the success of occupational pensions, personal pensions and, above all, the state earnings-related pension scheme introduced by the last Labour Government. We cannot wipe away the pension provision that was legislated for all those years ago, and concentrate, to the exclusion of everything else, on the basic state pension. It is not a fair comparison.

State Earnings-related Pension Scheme

Mr. David Rendel: When he will publish further details of the inherited SERPS scheme announced on 15 March. [115879]

The Minister of State, Department of Social Security (Mr. Jeff Rooker): As my right hon. Friend the Secretary of State said in his statement to the House on 15 March, once we have developed the details of the scheme for inherited SERPS we shall put them to the House. The National Audit Office and the parliamentary ombudsman will be fully involved in developing the procedures. We want to ensure that we get the scheme right, so that we can deal with the problem we inherited. Later today, the Public Accounts Committee will begin its inquiry into the report.

Mr. Rendel: In his original statement, the Secretary of State said:
We want to ensure that everyone who has been misled and has lost out gets redress.— [Official Report, 15 March 2000; Vol. 346, c. 308.]
Can the Minister guarantee that there will be no cut-off point for claims?

Mr. Rooker: There will be a scheme, which will have to be submitted to the House for approval. I cannot say when that will happen: I cannot be certain whether it will be before the summer recess, or in the autumn.
We said at the time that we did not expect the scheme to be up and running until next year. We have delayed the date of the inherited SERPS change until 6 October 2002, 30 months later than would otherwise have obtained. There will then be a massive advertising scheme to get people to apply for their benefit. If people claim and can show that they have been misled by my Department owing to maladministration, they will be included in the scheme.
The scheme will not run for ever.

Mr. Rendel: Ah!

Mr. Rooker: I must make that clear: the scheme cannot run for ever. I do not know when and for how long it will run. Subsequently, we shall put to the House regulations that will be properly debated in both Houses. We simply do not have detailed answers to the legitimate questions asked by the hon. Gentleman, but I do not want to give him the impression that the inherited SERPS scheme will be open for the next 30 years, because it will not be.

Lone Parents

Caroline Flint: What his Department has done to help reduce the barriers to work faced by lone parents. [115880]

The Parliamentary Under-Secretary of State for Social Security (Angela Eagle): We are tackling the barriers to work for lone parents with a raft of measures, including the new deal for lone parents and the working families tax credit. The Budget announced still more help for lone parents. For example, from April 2001 all lone parents working 16 hours a week or more will receive at least £155. They will receive £214 if they work more than 35 hours.

Caroline Flint: I welcome the opportunity for lone parents to keep their benefits for four weeks during their transition to work. Will my hon. Friend explain how changes in housing benefit will assist lone parents in that transition? Will she also look into the ending of the top-up allowance pilot? It affects a number of my constituents, some of whom are lone parents. When it ends, they may be back on benefit, especially if they have taken up part-time work.

Angela Eagle: The housing benefit run-on announced, and made automatic, in the Budget statement will guarantee that anyone who ceases to depend on benefits and takes up work can receive housing benefit for the month in question before receiving his or her first wage. We know that the transition from benefits to work, and the gaps that must be filled, lead many people to believe that they cannot make such a transition. It is therefore important for us to produce welfare-to-work measures to reassure those people that it is possible for them to return to work, and that we will remove the barriers so that they can become independent again.

Dr. Julian Lewis: Does the Minister accept that, according to figures from her own Department, fewer than 6 per cent. of lone parents invited to join the scheme have secured employment as a result? Does she regard that as a success or a failure?

Angela Eagle: We consider the new deal for lone parents a success. Some 41,000 lone parents are now in work who would not have been if it had not existed.
The hon. Gentleman's party abandoned lone parents. It left them no way of obtaining work, and gave them no extra help. It just lectured them about having children and being on their own. We are offering real help and support for people who want to return to work, as part of our crusade to tackle child poverty. The only way in which we can eliminate child poverty, as the Prime Minister wishes us to do within 20 years, is to help the parents too—and that includes lone parents.

Benefits Take-up

Ann Clwyd: What estimate he has made of the numbers of people entitled to social security benefits who are not claiming them. [115884]

The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley): Estimates on take-up of benefits are published annually. While take-up of benefits among some client groups is high, there is a particular and long-standing problem of relatively low take-up of income support among pensioners. We have therefore decided to focus on that group, and, last week, announced details of a take-up campaign which will identify pensioners who may be entitled and encourage them to claim their minimum income guarantee.

Ann Clwyd: Will my hon. Friend take the opportunity to pay tribute to voluntary organisations such as Age

Concern in the Cynon Valley, whose advice surgery I visited last week? That organisation has enabled thousands of people in my constituency to take advantage of the benefits to which they are entitled. Will he ensure that, in the Government's advertising campaign to start in May, it is made clear that claiming benefits to which one is entitled has no stigma at all attached to it?

Mr. Bayley: Yes, we will do that. We will encourage people to claim, because it is their entitlement and their right to do so. We shall have an extremely vigorous campaign, and welcome any support that we receive from voluntary bodies in pursuing that take-up campaign, and in making it more successful than it has been hitherto.

Rover

Mrs. Angela Browning: Madam Speaker, I wish to ask a question of which I have given you prior notice.
The future of Rover is becoming a question of the future of the Secretary of State—

Madam Speaker: Order. The hon. Lady should ask the private notice question, and then reply to the Secretary of State's statement.

Mrs. Browning: (by private notice): To ask the Secretary of State for Trade and Industry if he will make a statement about the latest developments in respect of Rover.

The Secretary of State for Trade and Industry (Mr. Stephen Byers): I think that we now know the first sentence of the hon. Lady's response to my statement, even before I have made it.
Thousands of individuals and their families have been affected by the decision taken by BMW in relation to Rover. Whole communities also will have to deal with the consequences. Those individuals and their families and communities are the focus of the Government's efforts.
On 16 March, the BMW supervisory board announced that it had entered into an agreement with Alchemy Partners to negotiate for the disposal of Rover Cars within six weeks. The following day, it announced that the heads of agreement had been reached with Ford for the sale of Land Rover, at Solihull. The same day, I established a taskforce involving all the partners in the areas most affected by BMW's decision to advise me on how we can support those affected. The taskforce is led by Alex Stephenson, who himself has personal experience as a former Rover director.
The Longbridge taskforce has three objectives: first, to assess the impact of any reduction in activity at Longbridge on the people, businesses and communities of the region; secondly, to advise on the public and private resources that are already available to help deal with those consequences; and, thirdly, to draw up proposals for action by local partners and by central Government. The taskforce is working hard on an interim report, to be submitted in the next few weeks.
I have asked the taskforce to take a wide remit, looking at what measures it will best use to regenerate the area and to replace economic activity lost at Rover. I have committed £129 million to support the taskforce's recommendations. The taskforce is looking at everything, including the implications for the supply chain and what we can do to support it; at training; and at infrastructure, including transport links. The taskforce has already issued a questionnaire to 5,000 companies, including 450 direct suppliers of Rover, to quantify the scale of impact on the supply chain. It will feed its recommendations in to me.
At this stage, I am not ruling anything out—I shall await the report. I can, however, say that I will do everything we can to encourage job creation and economic activity in the area—not only by stepping up my Department's action on attracting new inward investment to the area, but by supporting the development and growth of home-grown companies.
My right hon. Friend the Secretary of State for Education and Employment has taken action to help those affected by any redundancies at Longbridge. The Employment Service has established a unit to offer help and assistance. A jobshop is in place at Longbridge to help those workers affected to find new jobs. Anyone made redundant at Longbridge will qualify for fast-tracking of benefit claims and early access to training and Employment Service programmes such as new deal and jobfinder services.
The taskforce, with the jobshop, has launched a freephone advice hotline, supported by BT, to advise supply chain companies with difficulties and to pool information on vacancies currently available in the car industry. The local training and enterprise council is also looking at specific training to meet the needs of those affected.
On 23 March, I met BMW representatives. We agreed that we needed to look forward and plan for the future. During our discussions, BMW agreed to minimise the job losses resulting from its decision. I explained that we felt it important that BMW should co-operate with the taskforce. BMW responded positively to this proposal.
Over the next few weeks, our objective is to manage the changes that will flow from BMW's decisions in a way that minimises the number of jobs to be lost, whether directly, or indirectly in the supply chain or dealership network. We shall also need to put in place a programme of economic regeneration and job creation.
When I met workers on the assembly line at Longbridge the day after BMW's decision, their anger and shock were clear, but so were their commitment and strength of character. The west midlands has come through difficult times in the past. I am confident that the area will do so again. The Government will do all that we can to ensure that together we can meet the challenges that lie ahead.

Mrs. Browning: In the seven months since the Secretary of State announced the deal that he had brokered at Rover-BMW, he has failed to come to the House to make a statement, despite many requests—not just during the crisis—from the Conservative party, to get him to answer questions. It is clear that he knew in December that Rover was in jeopardy. Only last Wednesday, when asked by my right hon. Friend the Leader of the Opposition, the Prime Minister refused to deny that BMW told the Secretary of State in December:
We may have to reconsider our whole investment in Britain altogether.
The details of the Secretary of State's meetings and discussions have been the subject of a cover-up. If the situation that faces BMW-Rover is now a crisis, it has been exacerbated by the way in which the Secretary of State has dealt with the matter. His incompetence has added to the turmoil in which the company finds itself today.
Last Thursday, the Secretary of State briefed the press about the detail, having refused only that morning to brief the House. He doctored the facts that he gave to the press. He refused to tell the House the details. The Secretary of State has been negligent. On the fate of Rover, he knew it and he blew it.
Will he undertake to publish today all the details of meetings, minutes and phone calls between his Department and BMW-Rover, to give the House and the


Select Committee on Trade and Industry the fullest information? Will he answer the question that he refused to answer last Thursday: when was he first aware that Rover was in trouble? What was the first date on which Rover-BMW suggested that the company was in difficulty?
Is it true, as reported in The Sunday Times, that the chairman of BMW told the Secretary of State on 22 December that Rover was "in critical survival mode" and "in serious trouble"? What action did he take in response? What action did he take when he heard that the European Union grant was in difficulty? Does he want to correct anything that he has told the House or the public to date about how he has supposedly managed the BMW-Rover deal?
Is the Secretary of State disturbed by the fact that the Prime Minister clearly no longer has any confidence in him? We do not want semantics: the Prime Minister made it quite clear last week that he believed that a telephone conversation had taken place on 22 December between the Secretary of State and BMW, yet last Thursday, the Secretary of State clung to the idea that the date was 20 December. We want to know whether it was 20 or 22 December. The workers at Rover want to know.
On behalf of thousands of workers and suppliers who will lose their jobs, we want answers and we want them now. We want to know today whether the Secretary of State will resign in recognition of his incompetence and negligence or whether he will leave the people at Longbridge under a stewardship that is not only incompetent but that, on many occasions, has failed to produce the truth when it has been asked for?

Mr. Byers: Unlike the hon. Lady, I have spoken directly to the assembly-line workers at Longbridge. I know who is on their side, and it is not her. That is the reality.
Among the rhetoric, the hon. Lady asked some specific questions, to each of which I shall give clear answers. I hope that she will listen carefully. She repeats the mistaken allegation first made in the House last Wednesday by the Leader of the Opposition, when he said that the chairman of BMW, Professor Milberg, had said in our telephone conversation that BMW
may have to reconsider our whole investment in Britain altogether.—[Official Report, 29 March 2000; Vol. 347, c. 333.]
I am pleased to say that last Thursday Professor Milberg made a statement. He said—[Interruption.]

Madam Speaker: Order. The Opposition asked for this private notice question. They might now listen to the answers.

Mr. Byers: Professor Milberg had seen the Leader of the Opposition's comments, so he had to go public. He said:
Concerning the requested state aid for Longbridge…I never said that the BMW group may have to reconsider its whole investment in Great Britain altogether.
The chairman of BMW made that statement on the record because he was worried about media reports that had been supported and restated by the Leader of the Opposition.
More interesting are the hon. Lady's points about the decision taken by BMW. She implied that the decision had been taken last year to pull out of Rover and the United Kingdom. We now have the benefit of the evidence given last week by Professor Samann, head of Rover in the United Kingdom, to the Select Committee. He said: "We"had to tell
the public and dealers until the end of February that we would like to continue the business. The decision not to continue the business was made between 1 March and 16 March.
There we have it. A conversation was conducted between me and Professor Milberg on 22 December. A decision had not been taken at that stage. Professor Samann made the point very clearly.
The hon. Lady asks a precise question: when did I know that Rover was in trouble? We have all known that it has been in trouble for a long time. In fact, I heard someone behind me say that it had been in trouble since before I was born, so we all know the situation, but, as the Chairman of the Select Committee said last week, it takes a leap of the imagination to go from a company being in trouble to a company deciding to dispose of Rover. That is the reality of the situation.
We now know that no decision was taken by BMW to dispose of Rover before 1 March this year. There was no indication that it was to pull out of Rover. That, too, is the reality of the situation. It is now about time that the hon. Lady and other Conservative Members stopped playing party politics and put the interests of the workers of Longbridge first.

Mr. Richard Burden: Is it not a fact that the people of Longbridge, the workers of Rover and, indeed, everyone else, were assured by BMW that it was in for the long term? It was not just in words. New plant for the new Mini was still going in at the very time that BMW made the announcement; indeed, work was still going on last week.
Is it not important that we look to the future? Is that not the real issue in the interests of workers at Longbridge and elsewhere? After the huge rally in Birmingham on Saturday, does not a message need to go to BMW that it is not acceptable to trade away the future of entire communities in secret boardroom deals, and that the long-term interests of its employees and the communities that rely on Rover must be a central part of its decisions and negotiations in coming weeks?
BMW should consider all credible potential bidders. The long-term interests of those communities should be one of its central considerations. Will the Secretary of State back the people of Longbridge and all Rover workers in asking for those things to be done?

Mr. Byers: My hon. Friend has been a powerful advocate for the work force at Longbridge. I will certainly take his important points into account.
My hon. Friend touches on the decision by BMW to continue in January and February with the investment in the Mini at Longbridge, a clear sign that it was committed to Rover and to the UK. Running alongside that were further signs. BMW had a team working with the Department of Trade and Industry to submit the application for European Union aid, which went in on 24 February. It called together its UK Rover dealers and


encouraged them to invest in new showrooms for the future. At the Geneva motorshow on 28 February, Professor Milberg said:
We are committed and steadfast to Rover in the United Kingdom.
There were all those public demonstrations, which every reasonable person would have assumed meant that BMW and Rover were in for the long haul. That is the reality of the situation. There was no indication that it intended to pull out of Rover and the UK.

Dr. Vincent Cable: May I first express solidarity and support for the workers of the west midlands, whose livelihoods, despite the valuable measures that the Government have announced, look extremely bleak, particularly for the older and more specialised workers?
The following point is probably the only one with which the Secretary of State will agree. Does he not agree that it is pathetic for the Conservative Opposition to launch an amateur detective story about who said what to whom—almost certainly because of their inability to deal with the fundamental issues affecting manufacturing and the motor car industry as a result of their ideologically driven belief that the exchange rate, which is the price at which British manufacturers compete overseas, should always be set in the free market, and that the British economy should be delinked from the euro area, in which the British motor industry is so heavily integrated?
I have a specific question for the Secretary of State. Given how much British industry and manufacturing depend on foreign investment in this country, does he now regret that he cast doubt on the good faith of the German manufacturers, and does he doubt the wisdom of those of his ministerial colleagues who attacked the trustworthiness of foreign investors in general?
Finally, has the right hon. Gentleman rethought his belief that manufacturers considered the exchange rate to be an excuse, in light of statements from Honda, Ford, the engineering union and the CBI that the exchange rate is absolutely fundamental to the industry's competitiveness?

Mr. Byers: A number of manufacturers—including some that export into Europe—have raised with the Government the question of the relative strength of sterling against European currencies. However, it is worth re-stating that the pound has remained at par against the dollar for five or six years, and that it has depreciated in value against the Japanese yen. That leads one to think that there must be economic reform in continental Europe if those currencies are to strengthen against the pound. I happen to believe, as does my right hon. Friend the Prime Minister, that the agreement secured at Lisbon 10 days or so ago will go a long way towards achieving that economic reform.
Interestingly, however, a number of manufacturers are being very successful, even in these difficult times. Although Honda has raised concerns about the strength of sterling, it decided 10 days ago to invest in a new plant at Swindon, which will employ 1,000 people. We heard on Saturday that Honda was planning to reduce production levels. The great irony is that that was somehow interpreted as a bad-news story, even though Honda had stated very clearly that the reduction was due to the installation of an assembly line for the new model

car being developed at Swindon. There is good news in the manufacturing sector, and it is about time that people recognised that.

Mr. Martin O'Neill: I thank my right hon. Friend for explaining clearly the role and responsibilities of the taskforce, and how it is to be funded, as much of the hopes of the people of the west midlands depend on it at this time. However, to end the paranoia of the second-rate Miss Marples on the Opposition Front Bench—

Madam Speaker: Order. That description is quite unnecessary, and I hope that the hon. Gentleman will rethink it.

Mr. O'Neill: I am sorry, Madam Speaker, if that description caused gratuitous offence. I thought a reference to one of Agatha Christie's minor detectives was not inappropriate.

Madam Speaker: I know exactly who the hon. Gentleman means, but quite frankly his reference causes me offence.

Mr. O'Neill: In that case, I withdraw it without reservation, Madam Speaker.
Will my right hon. Friend the Secretary of State save the House time and, before the end of business today, place in the Library of the House copies of the conversations that he has had with Professor Milberg?

Mr. Byers: My hon. Friend is Chairman of the Select Committee on Trade and Industry and I certainly intend to supply the Select Committee with those details before its hearing on Wednesday. I will also make those details public more generally, provided that BMW agrees.

Miss Julie Kirkbride: The Secretary of State will know that 1,500 workers at the Longbridge factory live in my constituency. I represent them, and their jobs are directly affected by the company's decision. They, and others in the west midlands, are not impressed by the headless chicken act performed by Labour Members who are determined to blame only BMW for the problems at the plant, even though most of the failure is due to the Government's economic management and the Secretary of State's failure to get an EU loan in time for the investment to be approved.
The right hon. Gentleman said earlier that it required a leap of imagination to know that the factory was in trouble, but Professor Milberg has insisted that he told the Department that
if structural aid is not approved, the BMW Group has to reconsider its investment plans for the R30 at Longbridge.
Does not the Secretary of State know that car making at Longbridge, in volume terms, depends entirely on the R30? Without the R30, there is no long-term future for volume car making at Longbridge. If he does not know that, he is either naive or ignorant. Either way, it is his fault that Longbridge now faces an uncertain future.

Mr. Byers: On occasions such as this, there will be comments such as those. It is probably more beneficial to the House to see what BMW has said about those matters.
The hon. Lady raises an important point about European aid. Let me quote from Professor Samann's evidence before the Select Committee on Trade and Industry last week, with specific reference to aid. He said:
There is no direct relationship between the grant aid issue and the situation now of us selling the Rover cars and the Land Rover business…We never mentioned that the grant aid deal would lead to a survival of Rover or would be absolutely necessary for Rover.
When asked specifically whether the aid last June would have made a difference, Professor Samann said:
We would be in exactly the same position.

Mr. Ken Purchase: Does the Secretary of State agree that, given the promises made earlier by BMW and throughout the piece, it has used the veneer of commercial confidentiality as a cover for treachery? That is all that I can see has happened. The Secretary of State negotiated, spoke and exchanged information honestly, while not all the cards were on the table, which should not happen in international dealings of this kind.
Will my right hon. Friend further accept that Renault in France is a highly successful, light-touch state-owned industry, and that any option that we look for in Britain should not rule out the possibility of European alliances with successful car companies such as Renault? Will he give an undertaking today—given that my constituency is also in trouble with regard to the Goodyear plant, and with 100 more jobs going at the Lucas plant—that he will keep an open mind and consider every option, particularly if it keeps a British hand on Rover and lets it find stronger, better markets than it has so far been able to do?

Mr. Byers: My hon. Friend has already privately raised with me his concerns about the situation at Goodyear. We are engaging with the company to see what help we might to be able to give to overcome the difficulties that Goodyear may have.
On the possibility of European restructuring and consolidation, much of that has already taken place. We know, for example, that Renault has gone into a partnership with Nissan. We know that there is overproduction in the European car market, which is bound to lead to further restructuring. The only way in which the change that we are witnessing will bring benefits and new opportunities is if we can manage that change. It is a matter of great regret, as far as BMW and Rover are concerned, that because the Government were not involved, we never had the opportunity of taking BMW through the arguments and the debate about what steps it should have taken and, in the process, putting the needs of the community in the west midlands and the individuals affected first.

Sir Norman Fowler: I declare an interest as a member of the Rover taskforce. Should not great credit be given to the workers at Longbridge who have worked hard to reverse the previous reputation of the plant? Will the Secretary of State confirm that whatever happens, they will provide an invaluable skilled resource in the west midlands? In that regard, can he say whether

in his talks with BMW, any assurance has been given that production at Longbridge will continue, at whatever level, until the sale of the company has been completed?

Mr. Byers: I thank the right hon. Gentleman for agreeing to serve as a member of the taskforce. Its deliberations will be enhanced by his presence.
The right hon. Gentleman makes an important point about the improvements in productivity at Longbridge. The figures that I saw showed that in just over 12 months, there was a 24 per cent. improvement in productivity from Longbridge workers. I have no doubt that in the months ahead that will stand them in good stead. They have shown real commitment and dedication to trying to turn Longbridge around.
In discussions with me, BMW has been guarded about negotiations with Alchemy Partners. It has made a commitment that no action will be taken before negotiations are completed, which provides some reassurance. However, job losses appear likely at Longbridge and the precise figures depend on the negotiations between BMW and Alchemy Partners. That is why it was important to have BMW give an assurance that it would do all that it could in those negotiations to minimise job losses.

Mr. Ian Pearson: May I tell my right hon. Friend that we in the west midlands are not saft? We know that the blame for Rover lies with BMW, which has betrayed midlands workers at Longbridge.

Miss Kirkbride: Your Government.

Mr. Pearson: If the hon. Members for Bromsgrove (Miss Kirkbride) and for Tiverton and Honiton (Mrs. Browning) had been at the march on Saturday, they would have seen the men, women and young children who are worried about their future livelihoods. That might have made them start to talk some of the common sense in which their party is supposed to believe. The hon. Member for Bromsgrove should take a leaf out of the book of the right hon. Member for Sutton Coldfield (Sir N. Fowler) and be a little more constructive in trying to find solutions that will help people.

Mr. Byers: rose—

Hon. Members: Answer!

Mr. Byers: My hon. Friend made an important point, as always. Difficult decisions and questions lie ahead, and the answers will affect individual workers, their families and the whole community of the west midlands. The people of the west midlands know where responsibility lies. An understanding was reached between the work force, the Government and BMW that, up to 2002, BMW would make losses, but would bear them and move on to break even. On that basis, we were prepared to give a commitment to provide £152 million. On that basis, working practices at Longbridge changed and productivity improved directly. That is why we all feel so badly let down—I should not be more intemperate than that, Madam Speaker—by the decisions taken in the dark by BMW without consultation or prior discussion.

Mr. John M. Taylor: Is the Secretary of State able to say more about the security of retirement


pensions for former Rover employees, particularly former employers of Land Rover in my constituency and that of my hon. Friend the Member for Meriden (Mrs. Spelman)?

Mr. Byers: I understand the concern felt by individuals at Land Rover or Longbridge about the possible effects of decisions by new owners. We have held discussions with BMW, and with Ford, which is likely to be the new owner of Land Rover at Solihull. BMW gave me assurances about pensions being protected at a meeting on 24 March. We must continue to revisit the point as it is clearly a cause of concern for existing workers and former employees who rely on the pension. The hon. Gentleman and the hon. Member for Meriden (Mrs. Spelman) will doubtless continue to raise the matter, and I welcome that. We shall certainly continue to do all that we can to ensure security for those who receive a pension from Rover and BMW.

Mr. Dennis Turner: I, too, represent a constituency in which thousands of workers will be affected by the decision taken on Rover. They and their families do not look forward to facing problems in the weeks and months ahead when many of them will be laid off. I want to say to the Opposition—[Interruption.] I hope that this will be the last time that we shall hear an issue as important as Rover raised in the way in which they have raised it today. [HON. MEMBERS: "Ask a question."] May I ask—

Madam Speaker: Order. This is a very emotive issue. Members know that thousands of their constituents may be laid off. I understand the emotion felt by many Members, but I ask the hon. Gentleman to put a question to the Secretary of State. That is what private notice questions are all about.

Mr. Turner: I want to ask the Secretary of State not to rule out any possibilities; I know that he has said from the Dispatch Box today that he will not rule any out. I hope that the Government will keep an open mind on any situation that might arise where a proactive response from the Government is needed to save many of the jobs that are currently involved.
I hope that the Government will listen to the people who were with us on Saturday's demonstration, marching and telling us what they want of this House of Commons and of this Government; and I hope that the Opposition will be more positive in future, and speak on behalf of those families, as Labour Members do.

Mr. Byers: We have no intention of walking away from this problem. This Government will discharge their responsibilities to the people of the west midlands and those individuals directly affected by BMW's decision. A number of economic regeneration programmes are already in place; these can be used as they provide a range of initiatives, which may well be appropriate to the situation that we now face at Longbridge.
I can give my hon. Friend an assurance that we do not rule out any of the proposals that might emerge from the taskforce. We need a comprehensive programme of economic regeneration and job creation. In the long term, that will be the only way forward for those affected by BMW's decisions.

Mrs. Caroline Spelman: The Secretary of State said in his statement that he would like to support

the affected communities, so how does he think they feel when they see that he was prepared to offer BMW £152 million of state aid but that he has offered the significantly lower sum of f129 million for the rescue package for the west midlands?

Mr. Byers: The £129 million that I have pledged is the Government's contribution towards the £152 million. The remainder is made up of a local package, and I hope that the local partners might feel able to make a contribution in kind to take us up to £152 million.

Mr. Robin Corbett: I am among those who have constituents affected by BMW's betrayal, both directly and among the component manufacturers and suppliers. However, may I say to my right hon. Friend that Jaguar demonstrates that, on the back of real commitment and sustained long-term investment, the motor industry in Birmingham and the west midlands can succeed and is succeeding? To overcome this particular problem, will he consider adding, let us say, £20 million to the budget for the objective 2 status money for the west midlands, to give the taskforce time to come up with plans and proposals to ease the impact of this blow?

Mr. Byers: My hon. Friend refers to the great success story that is Jaguar—nearby Peugeot has also been extremely successful—demonstrating that the car industry is strong in the United Kingdom. He raises the point about additional funding for the taskforce. The £129 million has been an immediate reaction to the needs of the taskforce—money which we had identified for alternative purposes. Of course, if good programmes come forward from the taskforce, we shall reconsider whether additional resources need to be made available.

Mr. Peter Luff: May I push the Secretary of State on that last answer? As I understand it, the £152 million was a sum negotiated between the Government and BMW for the aid for the investment at Longbridge, and now the Secretary of State has arbitrarily plucked that figure out of the air as a sum necessary to fund the taskforce's recommendations. May I press him urgently to say that if the taskforce—about which I have serious reservations, not because of some of its members but because of its leadership—comes forward with a workmanlike programme, additional money will be available, if necessary, to undo the disaster at Longbridge?

Mr. Byers: The £129 million was available to be committed immediately because it was money that was tied to BMW's further investment in the R30 at Longbridge. Given BMW's decision to dispose of Longbridge to Alchemy Partners, that was money that was then freed up, so I can make an immediate commitment of that funding to the taskforce. As I told my hon. Friend the Member for Birmingham, Erdington (Mr. Corbett), if good proposals emerge from the taskforce that require additional funding, £129 million is not a cap; we can of course go higher if there are good proposals coming forward that will assist the economic regeneration of, and job creation in, the west midlands.

Mr. Steve McCabe: With two notable exceptions, Conservative Members are


seeking to make cheap political capital out of this issue. Their remarks do not reflect how we are feeling in the west midlands.
I welcome my right hon. Friend's assurance that he will do all that he can to bring additional resources and new industries to the area. Will he consider holding talks with the banks and the building societies so that Rover workers and their families are spared the additional concern of losing their homes as well as their jobs?

Mr. Byers: I can fully understand the concerns of those who might be affected by a redundancy programme about how they will pay their mortgages. My hon. Friend has already raised with me the issue of trying to get the banks and the building societies to look sympathetically on people who might have short-term difficulties. Certainly, we are prepared to do that, and the taskforce will consider specifically what help can be given to firms in the supply chain to overcome cash-flow problems that many of them will have as a result of BMW's decisions in relation to Longbridge. Those are practical measures that we are putting in place. We are not being distracted from our course by the smoke and the political arguments from the Conservative party. We are committed to putting the interests of those workers and their families first and we will continue to do that. They have to be the focus of our attention at present.

Mr. John Redwood: The Secretary of State has failed to deliver a crucial grant to Rover, he has upset BMW, he has upset the new owners of Rover and he has put off many people who were thinking of buying cars. It is diplomatic incompetence on a scale that the Foreign Secretary would be proud of.
Will the Secretary of State answer a simple question today? Should an individual wanting to buy a new car in this country delay their purchase for longer in the belief that the right hon. Gentleman will force further cuts in car prices, or not? The right hon. Gentleman's indecision about car prices and his incompetence about the grant is destroying Rover and is destroying the British motor industry. He has made the dog's breakfast of it. Will he now go before it gets worse?

Mr. Byers: There is a delicious irony in such an anti-European trying to make a political comeback out of the actions of a German car company. That is what is happening and people will see it for what it is. I tell Conservative Members that I feel far more secure in my post than the hon. Member for Tiverton and Honiton (Mrs. Browning) feels in hers.
On the right hon. Gentleman's specific point, I make no apology for having referred the question of car prices to the Competition Commission on the advice of the Director General of Fair Trading. We will respond to its findings within the 10-week administrative period that is laid down and we will respond before Easter. We will put the interests of consumers first for the simple reason that strong and assertive consumers build strong companies. That is the American experience; it now needs to be the British experience as well.

Dr. Lynne Jones: May I remind my hon. Friend that, when the former Tory Prime

Minister was asked about the sale by British Aerospace of Rover to BMW, he said that that was not a matter for him? In contrast, may I welcome this Government's immediate action in setting up the taskforce and making £129 million available, and my right hon. Friend's assurances that additional money will be made available if it is needed?
Will my right hon. Friend assure the House that the Government will give every possible support to any credible alternative to the Alchemy deal that will maintain volume car production at Longbridge, and that he will encourage BMW to co-operate with any such proposal? Will he also consider whether it might be appropriate to strengthen the rights of British workers, so that they are not always the first to be made redundant when European and multinational car companies seek to cut back?

Mr. Byers: What is interesting in this case is that there is a European works council for Longbridge and the workers at Rover, but it was not consulted as part of the process, so clearly there are flaws in the existing structure.
On an alternative to Alchemy Partners, the Government have made it clear that if Rover has to be sold, and Longbridge has to be part of that sale, we want a new owner who is committed to maintaining the maximum number of jobs and to maintaining car production. That is the objective that we have set ourselves, and we hope that someone may come forward to achieve that. However, as I am sure my hon. Friend is aware, Professor Samann said in his evidence to the Select Committee last week that at present Alchemy Partners is the only show in town.

Mr. Nicholas Soames: Why, in respect of the tragedy that has befallen Longbridge, has the Secretary of State been so dilatory in appearing in Parliament to brief us about the awful events at Longbridge? What lessons has he learned from the dismal, negligent way in which he has handled this matter, in respect of the hard and heavy rumours that are emanating from Ford at Dagenham?

Mr. Byers: The hon. Gentleman may like to base his decision making on rumours and speculation; I would much rather base my decision making on answers that I receive to clear questions. When I have asked BMW clear questions, I have received clear, precise replies, but none of them indicated, or even hinted, that the disposal of Rover was one of the options that it was considering. That is the reality. I am looking forward to giving evidence before the Select Committee on Wednesday, when I will have a further opportunity to go through, in detail, exactly what was said when and where.
I can understand why Opposition Members are on this detective chase: one, because they have no policies of their own which would deal with a situation such as this; and two, because they do not care about the impact on the individuals and communities affected. It is worth reminding ourselves that they are the party which in the early 1990s presided over an economic situation in which millions of manufacturing jobs were lost, tens of thousands of them in the west midlands. We shall not repeat those mistakes.

Mr. Tony Benn: Is the Secretary of State aware that everybody outside knows that the


responsibility for this tragedy rests with BMW, and not with the Government, and therefore the attempt to make capital out of it carries no weight? At the same time, however, this is a catastrophe because some of the greatest skills in British manufacturing could be lost, and communities could be destroyed. Those of us who represented mining areas know exactly what that is like.
Are not there lessons to be learned from this to which the Government should turn their attention? Is it right that our industrial future should rest in the hands of foreign companies without any requirement from the Government to oblige them to enter into agreements with them of a kind that have been contemplated in the past?
Is it not a fact that the exchange rate, although perhaps not the only consideration, was a serious consideration in this case? I know of a potential closure in my constituency where the exchange rate was the dominant consideration. Is it prudent to have a financial policy that endangers manufacturing? Would not it be right for the Government to offer support by way of investment in shares in companies, so as to get a commitment to manufacturing?
After Harland and Wolff, Dagenham and now, possibly, Honda, is it not clear that there needs to be a plainer statement of commitment by the Government not only to workers in difficulty but to the maintenance of manufacturing industry in Britain, on which our whole past strength was built and our future depends?

Mr. Byers: I agree with my right hon. Friend about the importance of manufacturing to the United Kingdom economy. The Government have already taken a number of steps to support manufacturing. There are many great successes in UK manufacturing, and the great danger when we face particular problems, whether at Harland and Wolff or, in this case, with BMW's decision about Rover, is that we will lose sight of those success stories. The manufacturing sector can learn from the strengths that exist. The skills and innovation in the UK need to be developed because that is where our future prosperity lies.
Great insecurity is felt at a time of globalisation, and there is a role to be played by Government, but I do not think that it is the role identified by my right hon. Friend.

We can manage a process of change and lead people through it, but we cannot dictate the way in which multinational companies make commercial decisions. Inward investment has brought great benefits to the United Kingdom and created hundreds of thousands of jobs. We should not adopt a kneejerk reaction to events at Longbridge, because immediate steps which appear attractive at the time might lead to our no longer being a country that is attractive to inward investment. That would deny opportunities to many hundreds of thousands of people who are currently employed by companies that could have chosen to go anywhere in the world, but chose to come to the United Kingdom.

Mr. Christopher Chope: What did the Secretary of State say to the chairman of BMW on 22 December?

Mr. Dennis Skinner: "Good morning"?

Mr. Byers: I did not say "Good morning"—or "Gluten Morgen" for that matter. I said that the grant aid would be subject to an investigation that would take four to five months; he replied that that was disappointing and that he would have to report it to his board. The conversation was all about investing in the R30 model, which is the new investment that BMW had planned for the Longbridge site.
It is interesting that, after our conversation, the chairman set up a team at BMW that worked with my Department to make a submission to the European Commission in support of the European aid; it was submitted on 24 February. Most important, the company continued its investment in the Mini: I believe that members of the Select Committee who visited Longbridge last week saw that, until a few weeks ago, the Mini assembly line was being installed at Longbridge, and it remains there. Those are clear indications that BMW was committed to Longbridge until, as Professor Samann said last week, 1 to 16 March this year, when the decision was taken to pull out.

Points of Order

Mr. John Bercow: On a point of order, Madam Speaker. I seek your guidance. Have you received a request from the Secretary of State for Education and Employment to make a statement about the future of grammar schools? There has apparently been a change of heart on the part of the Government. On 8 December, during an Adjournment debate in Westminster Hall, the Minister for School Standards clearly told me and other right hon. and hon. Members, at column 265WH, that she had no intention of being dragged into the trap of stating her personal views on the future of grammar schools. However, over the weekend, we have received news that the Secretary of State has provided moral succour and personal encouragement to the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Stretford and Urmston (Ms Hughes), in campaigning for a grammar school ballot in Trafford. My question is simple: if the Government's policy has changed and Ministers now want to work hand in glove with educational vandals in that respect, should we not be informed of that in the House and given the opportunity to subject the Secretary of State to proper scrutiny?

Madam Speaker: I have not been informed of such a request, nor do I believe that the Secretary of State is seeking to make a statement on that issue. May I give the hon. Member some guidance? If he raises points of order in future, it will be better if he is brisk about them and comes immediately to the point. They will then be more appreciated by the occupant of the Chair and by the entire House.

Mr. Tam Dalyell: On a point of order, Madam Speaker. Over the weekend, there have been a number of reports, some of them somewhat garbled, that guidelines for the use of NATO and UN forces in Kosovo have come into the hands of those whom they ought not to have reached. To clarify the matter and for the sake of the whole situation in Kosovo, not least that of UN forces, has there been a request to make a statement from Ministers at either the Ministry of Defence or the Foreign and Commonwealth Office?

Madam Speaker: I have to tell the hon. Gentleman that I have received no indication that anyone from the Ministry of Defence seeks to make a statement on that issue. I direct him to the use of parliamentary questions, with which he is very familiar.

Orders of the Day — Child Support, Pensions and Social Security Bill

[2ND ALLOTTED DAY]

As amended in the Standing Committee, further considered.

Clause 69

CONTRIBUTIONS IN RESPECT OF BENEFITS IN KIND: GREAT BRITAIN

Mr. David Willetts: I beg to move amendment No. 62, in page 68, line 37, at end insert—
'( ) Nothing in this section shall apply to any childcare provision by the employer, which shall be exempt from Class IA National Insurance contributions.'.

Madam Speaker: With this it will be convenient to discuss amendment No. 63, in page 68, line 37, at end insert—
'( ) Nothing in this section shall apply to any healthcare provision by the employer, which shall be exempt from Class IA National Insurance contributions.'.

Mr. Willetts: Clause 69 is the stealth tax clause. It is the clause that imposes employers national insurance contributions on a range of benefits in kind, from Christmas parties to rape alarms. Its purpose is to raise £225 million of extra revenue without the Government being caught out by anybody spotting what they are up to. The clause is where the damage is done.
We thought from the exchanges that we have already had with Ministers that the Government were arguing that everything that bore income tax as a benefit in kind should also bear employers national insurance contributions. That was very much the tenor of the Minister of State's remarks in Committee. He said:
The trigger for the change is the taxation of the benefit in kind, not the other way round. The national insurance does not cause the tax to be paid; the tax causes the national insurance to be paid.— [Official Report, Standing Committee A, 2 March 2000; c. 675.]
The Minister of State was formulating what we could flatteringly regard as the Rooker doctrine. In effect, he was saying, "If there is a tax liability, there should be a national insurance liability as well." We could understand that doctrine. We might not agree with it, but at least it was coherent and consistent.
The problem for the Minister is that the Chancellor of the Exchequer has knocked that argument away in his Budget statement. The right hon. Gentleman proudly announced that when it comes to child care, although that is taxable as a benefit in kind, it will not be subject to national insurance contributions for the employer. Paragraph 4.47 is entitled "Encouraging employers to provide childcare." It states:
To encourage employers to help employees with childcare, all provision in kind will remain exempt from employer class IA national insurance contributions when these are extended to other employee benefits from April 2000.


The Chancellor has therefore made it clear that it is possible for a benefit in kind to bear tax and that it does not need automatically to bear employers national insurance contributions as well.
That has an unfortunate consequence for the Minister of State. It leaves the ingenious doctrine that he formulated in Committee looking rather threadbare. He cannot say that he must impose national insurance contributions on all these items because they are taxable, because the Chancellor has taken credit for doing exactly the opposite. He has chosen something that will bear tax but does not have to bear national insurance contributions.
Amendment No. 62 takes the Chancellor at his word. It would deliver what the right hon. Gentleman was talking about in his Budget statement and would exempt child care from employers national insurance contributions. Perhaps this is the triumph of optimism over experience, but we rather hope that the Government will accept the amendment. It is absolutely in line with what the Chancellor said in the Budget. It would be a challenge even to the Minister of State's ingenuity to work out why he should whip his right hon. and hon. Friends to vote against an amendment that merely implements one of the Chancellor's announcements.

Mr. Edward Leigh: Perhaps I can help my hon. Friend to understand why the Government may not want to accept the amendment. If the provision is on the statute book, it will be in tablets of stone and they will be committed to it, whereas if it is not, the Chancellor can always change his mind in future.

Mr. Willetts: My hon. Friend makes an ingenious suggestion. I hope that he is not right, but he may be. We shall be interested to see what grounds, if any, the Minister offers for not accepting the amendment.

Mr. Steve Webb: I intervene on a point of clarification. We are listening to the debate with genuine interest. The amendment refers to child care. Is that a reference only to employer workplace-provided child care? Does it include vouchers? What comes within the scope of the amendment?

Mr. Willetts: I would be happy to accept the definition that the Chancellor offered in the Red Book. If the Minister offered a revised text of the amendment so that it exactly followed the lines of the Red Book, I would be happy with that. The Red Book states:
This employer NICs exemption will apply to direct provision, childcare vouchers and payments under contracts between employers and third party providers.
We would be happy with a provision that exactly matched what the Chancellor said. If any change in the drafting were needed to clarify the amendment, we would welcome that.
Amendment No. 62 would merely implement through the Bill what the Chancellor said that he wanted to do in the Budget. We know from the fascinating exchanges between my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) and the Minister in Committee that changes to national insurance contribution rates may be better implemented in social security legislation than in Finance Bill measures.
If the Government do not do so now, it is not clear that they will be able to do so in the Finance Bill, so they may have to wait for some other social security legislation. Given that we want to get on with the policy, I do not see why the Minister would not choose to use the vehicle conveniently before us, so I hope that he will accept amendment No. 62.
Amendment No. 63 applies the same philosophy to payments for insurance for medical care. If the Government recognise that employers NICs do not have to be applied to every taxable benefit, and if they proudly make a virtue of exempting child care from employers NICs, our view is that exactly the same arguments apply to health care and medical insurance.
If an employer is so public spirited as to want to provide child care facilities for his staff, and will not bear employers national insurance contributions for that, and if he wishes to provide flu jabs for his staff, why is that not at least equally deserving? Why does not that, as well as the entire range of medical insurance payments, merit exemption from employers NICs?
We say that if there is an argument for an exemption from employers NICs for child care, there is at least as good an argument for an exemption for private health care. If the argument is good enough for the Chancellor to use with reference to child care, we want to hear from the Minister why he thinks that employers providing medical care in whatever form for their employees should be taxed more heavily—should bear an extra 12 per cent. employers NICs—than for providing child care. We regard the benefits as equally desirable, and we see no basis for exempting one from national insurance contributions, but not the other.

Mr. John Bercow: I am grateful to my hon. Friend for giving way. As usual, he is intellectually right, but is not the reason why the Government may have a problem with the argument that although they have no known ideological objection to children, they have a known and inveterate ideological objection to private health insurance?

Mr. Willetts: When my hon. Friend said that I was winning the argument intellectually, I knew that that was a polite way of saying that he thought I was losing. He may well be right about the reason why the Government may not accept the amendment—because of their hostility to private health care.
I end my brief comments by referring the Minister of State yet again—I promise him that it will be the last time today—to what the Labour manifesto states on the subject. I found a couple of copies of the Labour manifesto remaindered in the fiction section of a bookshop, and I have enjoyed citing quotations from it all afternoon. On taxation, it states:
Taxation is not neutral in the way it raises revenue. How and what governments tax sends clear signals about the economic activities they believe should be encouraged or discouraged, and the values they wish to entrench in society.
That is why my hon. Friend the Member for Buckingham (Mr. Bercow) was absolutely right. If the Government oppose amendment No. 63, it is because they do not like private health care and private medical insurance. That is


wrong and irresponsible, especially in view of the pressures on the health service. We therefore urge the Government to accept the amendments.

Mr. Laurence Robertson: Unless the amendments are accepted, the Bill will discourage people from becoming good employers. After all the Government have said about encouraging people to be good employers, they should accept such amendments, which will enable people to become good employers by encouraging them to look after their staff.
My hon. Friend the Member for Havant (Mr. Willetts) gave some good examples of charging income tax but not national insurance. He could have gone on to say that tax but not national insurance is charged on salaries that are above a specific amount. There are many different ways of viewing the matter. It is wrong of the Government to suggest that there are precedents and that, if something is subject to tax, it automatically has to be subject to national insurance. That is wrong and inconsistent.
I believed that the Government intended to encourage employers to provide child care facilities. We have sat here time and again and listened to such proposals. I would therefore be surprised if the Government did not accept amendment No. 62.
Our national health service is struggling and we have to find not only more private provision, but more money for the health service. We should therefore try to do that. If we are to build the sort of health service that everybody wants and that people rightly demand nowadays, we have to find new ways of putting money into the health service or any health care provision. It would therefore be rather perverse to discourage employers from providing money that would relieve the strain on the health service.
With those few remarks, I support amendments Nos. 62 and 63.

Mr. Desmond Swayne: The Minister must explain why amendment No. 62 is not a Government amendment. If the Government do not take this opportunity to implement the Chancellor's proposals, what opportunity will they take? I look forward with interest to finding out why the Minister has not introduced such a proposal, never mind his reasons for not accepting the amendment.
In addition to the comments of my hon. Friend the Member for Havant (Mr. Willetts) on amendment No. 63, it strikes me that it is an employment-creating measure. Many small businesses provide insurance through the sort of cover with which the amendment deals because they cannot afford to lose key individuals through medical problems for a prolonged period. That would have detrimental consequences for the employment opportunities of other personnel in the small firm. They therefore provide for private health care insurance so that there is no delay when medical treatment is required for conditions such as hernias. We should encourage such activity by accepting amendment No. 63. That is desirable and will create greater efficiency in the workplace.
With respect to what my hon. Friend the Member for Tewkesbury (Mr. Robertson) said, the Prime Minister has attached a target to the percentage of gross national product that we should spend on health care. He cited

the European average, but comparable economies such as Germany and France spend a great deal more on health care than Britain—approaching 10 per cent. At the current rate of growth in health expenditure, it will take us 19 and 25 years to achieve their respective levels of provision. Those countries achieve those levels by relying on private sector funding, which is precisely what amendment No. 63 would promote. It may be the answer to the problem for which the Prime Minister has been seeking a solution, and I urge the Minister to give it full consideration.

Mr. Quentin Davies: My hon. Friend the Member for New Forest, West (Mr. Swayne) pertinently asked why the Government have not tabled such amendments, but we shall not receive a frank answer to that question from Labour Members, and the reason for that must be exposed in the debate. The Government have a double agenda, which they do not want to reveal explicitly to the electorate, but which my hon. Friend the Member for Havant (Mr. Willetts) has exposed, and usefully so, by tabling the amendments.
The first part of the double agenda is the extension of employer's national insurance contributions to such benefits. That is one of a range of stealth taxes that have been imposed on the British people since they misguidedly voted for a Labour Government in 1997. They were not least misguided by the Prime Minister's explicit promise, "We have no plans to increase taxes at all." That was a thoroughly dishonest promise: the pensions tax was introduced within a few weeks, there have been enormous increases in petrol duty, and married couples allowance and mortgage interest relief have been removed—an endless series of stealth taxes. The proposal is simply another in the series and it cannot be understood except against the background of the covert Government policy of increasing the tax burden while pretending to the British public that it is not increasing at all. The amendments have exposed that particular purpose and it is no surprise that the Government are not only not adopting them, but, I am convinced, will oppose them if my hon. Friends decide to put them to the vote.
The second part of the agenda is also covert, but it has already been revealed as it has surfaced in a number of contexts and we ought to be alive to it: the Government intend to run down private sector medicine, private sector provision and private health insurance for the most destructive of ideological reasons. That cannot be in the interests of the country's health, and I shall explain why in a moment.
The Government's agenda has already manifested itself in the removal of the tax break provided by the previous Conservative Government to people of retirement age for paying private medical insurance premiums. That compensating tax break was provided because people beyond a certain age, and certainly those in retirement, have to pay much higher premiums, but it has been taken away. That was also a stealth tax, though it has never been admitted as such, and an attack on the private medical insurance system. The Government want to reduce the flow of premium income to the private health sector and the proposal is part and parcel of that agenda.
The Government is penalising employers by taxing them for providing such benefits to their employees and people out there who elected us to the House will think that particularly cruel as the national health service is


breaking down. This winter, the NHS has been in an unprecedented crisis. Waiting lists are increasing, and the nasty new phenomenon of a waiting list to get on a waiting list has entered the system in our country—and our country alone among EU countries, as my hon. Friend the Member for New Forest, West said.
4.45 pm
Against that background, the Government wants to penalise employers who try to help their employees because the national health service is falling down and may not be there when they need it. That is bad not only for the employers who are being penalised, but for the health of the country as a whole. The effect of the Government's proposals will be to reduce the total flow of funds through private health insurance premiums and the private health insurance system into the provision of health care. That is bound to happen. That flow will be reduced unless amendment No. 63 is adopted so as to restore the position. As night follows day, if the price of something is increased, the demand for it is reduced. The net price to employers of providing such protection will be increased by the Bill unless it is amended.
We should clear our minds of any ideological prejudice on this matter, and consider the practical consequences of voting through the Bill without this amendment. If the amendment is not accepted, it will be very bad for the health of the nation for two reasons. If people have their own provision and can purchase private sector care, they no longer claim on the national health service. People can be taken off NHS waiting lists if their employer is providing private sector cover for them, and others who are not lucky enough to have an employer who can afford to provide such cover can be brought forward on the waiting list, all other things remaining equal. Under the Labour Government, no doubt the waiting lists will get worse, but all other things being equal, if the amendment is accepted, the position will be alleviated not just for the beneficiaries of private sector insurance, but for those who do not enjoy such private sector cover.
Another aspect may not have occurred to the Minister of State. More resources coming into the health service means that more people are employed, and that those who work in the private sector and the NHS are provided with a higher total income than they would otherwise receive. It is well known that many consultants practise in the health service under NHS contracts for four days a week, and are at liberty on the fifth and sixth day—they often work on Saturdays—to provide care for their private patients. Those private patients do not therefore have to wait in line, and the consultants, junior doctors and nurses get more income than they would get if we did not have that system.
If doctors and nurses were deprived of that income, the gap between medical earnings in this country and those in other EU countries or in the rest of the civilised world would increase even further. People would be dissatisfied with that, and fewer people would take up a medical career. Many people who practise medicine—especially the best people—would go abroad. They would obviously be allowed to work in EU countries, but they could also work in much of the world, even in countries where work permits are required. It is easy for a qualified doctor or nurse to acquire a work permit. There would be a real

loss. It would be a double whammy attack on the provision of health care if the Government were allowed to proceed in that direction.
These two amendments are an attempt to save the country from a further manifestation—one more instalment—of the Government's two agendas: stealth taxes and the desire to penalise and ultimately to undermine private sector health provision. Those are two important issues. They are no less important because the Government continually try to bamboozle the British public so that people do not realise what agenda they are pursuing. On those two bases, we should support the amendments tabled by my right hon. and hon. Friends.

Mr. Leigh: This has the makings of an interesting debate, and we can be justified in looking forward to the Minister's reply. It will enable the Government to clarify their attitude to the way in which employers should provide for their employees. What sort of tax and national insurance system do we want to create?
To be fair to the Government, some argue that the tax system should provide no allowances. They argue that it should be entirely neutral, and that the Government should have no role in trying to persuade people to adopt particular modes of behaviour. That, they say, is why the married persons allowance and the mortgage allowance should be swept away. That is a point of view, although it is not one with which I agree, and it is relevant to our debate about national insurance contributions. The Government could say, "We are not interested in what provision employers make for their employees. It is not our business whether the provision involved relates to small matters such as Christmas parties or big matters such as health care or pensions."
An employer may wish to provide not just a perk—something enabling him to avoid paying tax—but something that he considers to be essential to himself and his employee. The Government could say, "Whatever extra provision the employer makes for his employee, we are justified in taxing it." Again, that is not a point of view with which I agree, but the issue is now so confused that the Government should explain their position.
Doing the right thing for society means saving for the future, for pensions, for health care that the NHS may not be able to deliver and for many other purposes. We can persuade people to do that only if we envisage a partnership between employee and employer. We are talking about good employers, not about fly-by-nights who try to do everything through sub-contractors, and do not care about their employees. When employers make provision for employees, we should welcome that, rather than saying, "This is another opportunity for us to raise £220 million in tax. The public will not notice, because it is buried deep in the Red Book. No employees will be affected. It will be a tax on employers, and they will not complain too much."
I understand where the Government are coming from, in terms of trying to raise money. What I cannot understand is the mixed message that they are sending to employers and employees about how good employment practices can be created. My hon. Friends are making the powerful point that we cannot possibly catch up with countries such as Germany and France in terms of health care provision for all employees—all people—simply by raising more taxes to pay for the national health service.


If we are to improve health care for everyone, we must encourage private sector involvement. At present, people—many on marginal incomes—are given no encouragement to provide for their own private health care: indeed, they are given positive disincentives. What harm can it do to tell good employers that it is a good idea for them to help their employees with private health insurance, if they have reason for doing so?

Mr. Bercow: Although many large companies already provide such assistance in the form of corporate medical insurance schemes, should we not do more to encourage small businesses to provide the same level of support, given that they constitute 99.6 per cent. of firms in Britain? They employ about 50 per cent. of the private sector work force, and generate two fifths of our national output. Should not Ministers be far more sensitive to their needs?

Mr. Leigh: Of course Ministers should be sensitive to the needs of small employers. At present, arrangements involving private health insurance are very much the prerogative of larger, wealthier companies. As my hon. Friend said, if we are to make any progress on the matter, we must try to find ways of encouraging smaller employers to make such provision.
There is, of course, nothing wrong with employers providing child care. However, I cannot understand why the Government are putting all their efforts and resources into child care. For Ministers, child care is a totem of their political correctness. Child care is the one thing that they are going to achieve—and I have no argument with that. If a good employer wants to help his employees with child care, I would welcome it. However, I cannot understand why the Government are promoting that type of social insurance—which in itself is an excellent thing to do—while ignoring all other concepts of social insurance.
Child care is important, but making provision for one's old age, health and even travel are equally important. I therefore hope that Ministers will not simply dismiss this group of amendments, but deal with the arguments. Surely the House is entitled at the very least to a clear manifestation of the philosophy behind the Government's objectives. Are they simply trying to raise money, or are they trying to send clear moral messages to employees and employers about how they should try to create a better society? We look forward to hearing the Minister's speech.

Mr. Howard Flight: All that I wish to add to the points that have already been made in the debate is that Governments of any party never consider the knock-on effects of this type of action.
The old sectors of our economy are hard pressed—they are suffering from major competition and examining ways of saving money. What will be the consequence of the Government's proposed new stealth tax? The consequence of the Government's proposal to subject provision of child care, health care and other services to national insurance is that the old companies will cease to provide those benefits to their staff. I say to the people of Britain, "Just remember: when you lose your health care, you have this Government to thank for it."
What about the new economy? Cisco says, "You just try assessing national insurance contributions on our share schemes. If you do, we'll move our research and development business overseas." The new economy is much rougher and tougher, and it probably will not even begin providing health care or other benefits. Nevertheless, the new economy will not simply lie down and accept this type of stealth tax.
Therefore—both on the specific issues of health care and child care, and on the wider issue of this wretched, bamboozling national insurance stealth tax—the Government are failing to take account of the impact of their actions on ordinary British citizens and on the quality of the total package that they receive from their employers.

The Minister of State, Department of Social Security (Mr. Jeff Rooker): I shall do my best to respond as briefly as possible to this group of amendments. I should like, first, to deal with the stealth tax bit of Opposition Members' speeches. Those hon. Members are simply playing around—and destroying the English language on an unparalleled scale—with such nonsense.
I am holding the regulatory impact assessment of the Child Support, Pensions and Social Security Bill, which was published last year, when the Bill was published, and is available free of charge. It contains 10 pages explaining the regulatory impact of the Bill on national insurance contributions. Some stealth tax! I also have the Inland Revenue's document on "Class IA National Insurance Contributions on Benefits in Kind", which, in draft, was sent to more than 1 million companies and employers. Some stealth tax! It is absolute nonsense to say that we are making proposals that people do not know about.

Mr. Quentin Davies: Will the Minister give way?

Mr. Rooker: I will not give way now.
Conservative Members should be ashamed of themselves for some of their comments—such as saying that we are taxing Christmas parties. Conservative Members have just ambled into the debate from their City jobs. We should let those who are viewing the debate know that—this is the reality—employers do not pay tax on a Christmas party that they provide for employees unless they provide at least £75 a head worth of benefit. That is not the type of Christmas party that any of my constituents would recognise. I wanted to get those points out of the way and on the record before we dealt with the main issues.
5 pm
We ask the House to disagree with both amendments. The national insurance provisions in the Bill are a step towards the alignment of tax and national insurance benefits. They are part of a package for implementing the recommendations in Martin Taylor's report "The Modernisation of Britain's Tax and Benefit System".
The extension of class 1A was announced by my right hon. Friend the Chancellor in his 1999 Budget. From April 2000, it will cover benefits in kind such as private health insurance, beneficial loans or the use of the company yacht. I am grateful to hon. Members for pointing out that employers will pay national insurance only on benefits in kind that are already subject to income tax. The employer will pay the same amount into the national insurance fund, however they reward their employees.
It seems to have escaped the attention of those on the Conservative Front Bench that national insurance has not been the bailiwick of the Department of Social Security since the Contributions Agency went to the Inland Revenue. It is not possible to deal with national insurance in a Finance Bill. Those who have served on Finance Bill Committees understand that. That is why we have included these clauses. The only reason why we do not have a Treasury Minister present is that it is only a couple of weeks since the Budget and it is an incredibly busy time for Treasury Ministers, with the Finance Bill about to be published. I am speaking on behalf of the Government, but in particular on behalf of the Treasury. We are putting a Treasury area of responsibility in our Bill.

Mr. Leigh: On a point of order, Mr. Deputy Speaker. I wonder whether we are elevating a new principle for our proceedings. We have just heard from the Minister that the issue that we are discussing is a matter for the Treasury, because that is the only Department that can make decisions on it, but Treasury Ministers cannot be bothered to come to the House because they have other things to do. Is not the House more important—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. That is not a point of order for the Chair. It is for the Government to choose who represents them on their policy.

Mr. Rooker: And it is not what I said, either. There is another aspect of the Bill that is essentially a matter for another Department, but it is wholly in order and 1 shall answer on that later in the debate, just as I did when we debated the Welfare Reform and Pensions Bill last year.

Mr. Eric Pickles: What about child care?

Mr. Rooker: The decision on child care will be made by my right hon. Friend the Chancellor of the Exchequer, who made the original decisions—and announced them in his 1999 Budget—on the extension of national insurance to benefits in kind. Since then, he has decided to introduce a child care exemption. I do not know the exact figure, because we do not have the necessary wording in the regulations, but it is about £1 million. The changes that we are considering will raise £225 million, so the child care element is peripheral.
We can deal with amendment No. 62 very quickly. It is unnecessary, because of my right hon. Friend the Chancellor's Budget announcement. The Bill provides powers for the issue to be dealt with by regulation in due course. We shall carry that through for issues that are exempted. Section 10(9), to be inserted in the Social Security Contributions and Benefits Act 1992 by clause 69, provides for class 1A contributions not to be payable or to be reduced in prescribed circumstances. The issue is fully covered and will be dealt with in regulations in due course. There is no secrecy. Provision will be made, but not in the Bill.
I also cannot support amendment No. 63. Excluding private health care provision from class IA contributions would undermine the main purpose of the measure, which is to align the tax and national insurance treatment of benefits in kind and to make the national insurance system fairer by bringing closer together the treatment of cash and non-cash earnings. The extension of class lA

will reduce the distortion in the national insurance system, which provides the incentive for employers to remunerate their employees with benefits rather than cash.
Bearing in mind what hon. Members have said about the national health service, of the £225 million that will be raised—roughly half of which will involve health care—£17 million will go to the NHS.

Mr. Pickles: Extra?

Mr. Rooker: Of course it is extra. It is £17 million new income.
The measure's prime purpose is to make the scheme fairer and to reflect modern pay practices. Rather than subsidising large firms, which can afford to offer their employees large packages of benefits in kind, at the expense of small firms and their employees, we prefer to level the playing field—and put more money into the national health service.
The amendments would deprive the NHS of £17 million.

Mr. Willetts: We have had a useful short debate. I congratulate my hon. Friends the Members for Tewkesbury (Mr. Robertson), for New Forest, West (Mr. Swayne), for Grantham and Stamford (Mr. Davies) and for Gainsborough (Mr. Leigh) on making some telling points, but I am afraid that the Minister's contribution was extremely depressing. It leaves us with no option other than to press the amendment to a vote, for two reasons: because we believe in encouraging child care and responsible employers rather than in imposing an extra 12 per cent. employers' contribution, which is a tax on child care; and because it will make the Government look absolutely ridiculous.
We are trying to implement a Budget measure, and the Minister will have to explain why he has decided to put his troops through the Lobby to vote against something that was in the Budget. We know that the Budget has had a rocky couple of weeks, but it seems a bit much when, the first time that a Budget measure is presented to the House, the Government Whips decide to vote against it. That is getting rather carried away.
The Minister's ultimate defence was, "Don't worry. We don't want to vote with you on the amendment tonight, but we will introduce a regulation that will have exactly the same effect." Why will he not simply vote with us to make the amendment? I look forward to seeing his correspondence with the Chancellor, explaining why he was not able to support an amendment that simply implements what was in the Budget.

Question put, That the amendment be made:—

The House divided: Ayes 143, Noes 265.

Division No. 134]
[5.8 pm


AYES


Ainsworth, Peter (E Surrey)
Boswell, Tim


Allan, Richard
Bottomley, Peter (Worthing W)


Amess, David
Brady, Graham


Arbuthnot, Rt Hon James
Brake, Tom


Ashdown, Rt Hon Paddy
Brazier, Julian


Atkinson, Peter (Hexham)
Breed, Colin


Ballard, Jackie
Brooke, Rt Hon Peter


Beith, Rt Hon A J
Browning, Mrs Angela


Bercow, John
Burns, Simon


Beresford, Sir Paul
Burstow, Paul






Butterfill, John
MacGregor, Rt Hon John


Cable, Dr Vincent
MacKay, Rt Hon Andrew


Campbell, Rt Hon Menzies (NE Fife)
Maclean, Rt Hon David



Maclennan, Rt Hon Robert


Chidgey, David
McLoughlin, Patrick


Chope, Christopher
Malins, Humfrey


Clappison, James
Maude, Rt Hon Francis


Clarke, Rt Hon Kenneth (Rushcliffe)
May, Mrs Theresa



Moore, Michael


Collins, Tim
Moss, Malcolm


Cotter, Brian
Norman, Archie


Cran, James
Oaten, Mark


Davies, Quentin (Grantham)
O'Brien, Stephen (Eddisbury)


Davis, Rt Hon David (Haltemprice)
Ottaway, Richard


Day, Stephen
Page, Richard


Duncan, Alan
Paice, James


Duncan Smith, Iain
Pickles, Eric


Evans, Nigel
Portillo, Rt Hon Michael


Faber, David
Prior, David


Fabricant, Michael
Randall, John


Fallon, Michael
Redwood, Rt Hon John


Flight, Howard
Rendel, David


Forth, Rt Hon Eric
Robathan, Andrew


Foster, Don (Bath)
Robertson, Laurence


Fowler, Rt Hon Sir Norman
Roe, Mrs Marion (Broxbourne)


Fox, Dr Liam
Rowe, Andrew (Faversham)


Fraser, Christopher
Ruffley, David


Gale, Roger
St Aubyn, Nick


Garnier, Edward
Sanders, Adrian


George, Andrew (St Ives)
Shephard, Rt Hon Mrs Gillian


Gibb, Nick
Shepherd, Richard


Gillan, Mrs Cheryl
Simpson, Keith (Mid-Norfolk)


Gray, James
Soames, Nicholas


Greenway, John
Spelman, Mrs Caroline


Grieve, Dominic
Spicer, Sir Michael


Gummer, Rt Hon John
Spring, Richard


Hague, Rt Hon William
Stanley, Rt Hon Sir John



Steen, Anthony


Hamilton, Rt Hon Sir Archie
 Swayne, Desmond


Hammond, Philip
 Syms, Robert


Harris, Dr Evan
Tapsell, Sir Peter


Hawkins, Nick
Taylor, Ian (Esher & Walton)


Hayes, John
Taylor, John M (Solihull)


Heald, Oliver
Taylor, Matthew (Truro)


Health, David(Somerton & Frome)
Thomas, Simon (Ceredigion)


Heathcoat-Amory, Rt Hon David
Tonge, Dr Jenny


Horam, John
Trend, Michael


Hunter, Andrew
Tyrie, Andrew


Jenkin, Bernard
Viggers, Peter


Johnson Smith, Rt Hon Sir Geoffrey
Walter, Robert



Wardle, Charles


Key, Robert
Waterson, Nigel


King, Rt Hon Tom (Bridgwater)
Webb, Steve


Kirkbride, Miss Julie
Wells, Bowen


Kirkwood, Archy
Whitney, Sir Raymond


Laing, Mrs Eleanor
Whittingdale, John


Lait, Mrs Jacqui
Willetts, David


Lansley, Andrew
Winterton, Mrs Ann (Congleton)


Leigh, Edward
Winterton, Nicholas (Macclesfield)


Letwin, Oliver
Yeo, Tim


Lewis, Dr Julian (New Forest E)
Young, Rt Hon Sir George


Lidington, David



Lilley, Rt Hon Peter
Tellers for the Ayes:


Lloyd, Rt Hon Sir Peter (Fareham)
Mr. Geoffrey Clifton-Brown


Llwyd, Elfyn
and


Loughton, Tim
Mr. Peter Luff.




NOES


Abbott, Ms Diane
Ashton, Joe


Ainger, Nick
Atherton, Ms Candy


Ainsworth, Robert (Cov'try NE)
Atkins, Charlotte


Alexander, Douglas
Austin, John


Allen, Graham
Barnes, Harry


Anderson, Donald (Swansea E)
Barron, Kevin


Anderson, Janet (Rossendale)
Bayley, Hugh


Armstrong, Rt Hon Ms Hilary
Beard, Nigel





Beckett, Rt Hon Mrs Margaret
Goggins, Paul


Bell, Martin (Tatton)
Golding, Mrs Llin


Benn, Rt Hon Tony (Chesterfield)
Gordon, Mrs Eileen


Bermingham, Gerald
Griffiths, Jane (Reading E)


Berry, Roger
Griffiths, Nigel (Edinburgh S)


Blears, Ms Hazel
Grocott, Bruce


Blizzard, Bob
Grogan, John


Blunkett, Rt Hon David
Hall, Mike (Weaver Vale)


Bradley, Keith (Withington)
Hamilton, Fabian (Leeds NE)


Bradley, Peter (The Wrekin)
Heal, Mrs Sylvia


Bradshaw, Ben
Healey, John


Brinton, Mrs Helen
Henderson, Doug (Newcastle N)


Brown, Rt Hon Nick (Newcastle E)
Henderson, Ivan (Harwich)


Browne, Desmond
Heppell, John


Buck, Ms Karen
Hill, Keith


Burden, Richard
Hoon, Rt Hon Geoffrey


Byers, Rt Hon Stephen
Hope, Phil


Campbell, Mrs Anne (C'bridge)
Hopkins, Kelvin


Campbell, Ronnie (Blyth V)
Howells, Dr Kim


Campbell-Savours, Dale
Hoyle, Lindsay


Caplin, Ivor
Hughes, Kevin (Doncaster N)


Casale, Roger
Humble, Mrs Joan


Cawsey, Ian
Hurst, Alan


Chapman, Ben (Wirral S)
Hutton, John


Clapham, Michael
Iddon, Dr Brian


Clark, Rt Hon Dr David (S Shields)
Illsley, Eric


Clark, Dr Lynda (Edinburgh Pentlands)
Jackson, Ms Glenda (Hampstead)



Jackson, Helen (Hillsborough)


Clark, Paul (Gillingham)
Jenkins, Brian


Clarke, Charles (Norwich S)
Johnson, Alan (Hull W & Hessle)


Clarke, Tony (Northampton S)
Johnson, Miss Melanie (Welwyn Hatfield)


Clelland, David



Clwyd, Ann
Jones, Rt Hon Barry (Alyn)


Coaker, Vernon
Jones, Helen (Warrington N)


Coffey, Ms Ann
Jones, Jon Owen (Cardiff C)


Coleman, Iain
Kaufman, Rt Hon Gerald


Colman, Tony
Keeble, Ms Sally


Connarty, Michael
Keen, Alan (Feltham & Heston)


Cook, Frank (Stockton N)
Keen, Ann (Brentford & Isleworth)


Cooper, Yvette
Kelly, Ms Ruth


Corbett, Robin
Kemp, Fraser


Corbyn, Jeremy
Kennedy, Jane (Wavertree)


Cousins, Jim
Khabra, Piara S


Crausby, David
Kidney, David


Cryer, John (Hornchurch)
King, Andy (Rugby & Kenilworth)


Cunningham, Jim (Cov'try S)
King, Ms Oona (Bethnal Green)


Dalyell, Tam
Laxton, Bob


Darling, Rt Hon Alistair
Lepper, David


Darvill, Keith
Leslie, Christopher


Davey, Valerie (Bristol W)
Levitt, Tom


Davidson, Ian
Lewis, Terry (Worsley)


Davies, Geraint (Croydon C)
Liddell, Rt Hon Mrs Helen


Dawson, Hilton
Linton, Martin


Dean, Mrs Janet
Lock, David


Dismore, Andrew
Love, Andrew


Dobbin, Jim
McAvoy, Thomas


Doran, Frank
McCabe, Steve


Dowd, Jim
McDonagh, Siobhain


Eagle, Angela (Wallasey)
Macdonald, Calum


Eagle, Maria (L'pool Garston)
McDonnell, John


Edwards, Huw
McGuire, Mrs Anne


Ennis, Jeff
Mackinlay, Andrew


Field, Rt Hon Frank
McNulty, Tony


Fisher, Mark
MacShane, Denis


Fitzpatrick, Jim
Mactaggart, Fiona


Fitzsimons, Lorna
McWalter, Tony


Flint, Caroline
McWilliam, John


Follett, Barbara
Mahon, Mrs Alice


Foster, Rt Hon Derek
Marsden, Gordon (Blackpool S)


Foster, Michael Jabez (Hastings)
Marsden, Paul (Shrewsbury)


Foster, Michael J (Worcester)
Marshall, Jim (Leicester S)


Foulkes, George
Marshall-Andrews, Robert


Gardiner, Barry
Meacher, Rt Hon Michael


Gerrard, Neil
Michie, Bill (Shef'ld Heeley)


Godman, Dr Norman A
Miller, Andrew


Godsiff, Roger
Moffatt, Laura






Morley, Elliot
Smith, Rt Hon Andrew (Oxford E)


Morris, Rt Hon Ms Estelle (B'ham Yardley)
Smith, Angela (Basildon)



Smith, Jacqui (Redditch)


Mountford, Kali
Smith, John (Glamorgan)


Mullin, Chris
Smith, Llew (Blaenau Gwent)


Murphy, Denis (Wansbeck)
Soley, Clive


Murphy, Jim (Eastwood)
Southworth, Ms Helen


Naysmith, Dr Doug
Spellar, John


Norris, Dan
Squire, Ms Rachel


O'Brien, Mike (N Warks)
Steinberg, Gerry


Olner, Bill
Stevenson, George


O'Neill, Martin
Stewart, David (Inverness E)


Osborne, Ms Sandra
Stewart, Ian (Eccles)


Palmer, Dr Nick
Stinchcombe, Paul


Pearson, Ian
Stoate, Dr Howard


Pendry, Tom
Straw, Rt Hon Jack


Perham, Ms Linda
Stringer, Graham


Pickthall, Colin
Stuart, Ms Gisela


Pike, Peter L
Sutcliffe, Gerry


Plaskitt, James
Taylor, Rt Hon Mrs Ann (Dewsbury)


Pollard, Kerry



Pond, Chris
Taylor, Ms Dari (Stockton S)


Pope, Greg
Taylor, David (NW Leics)


Pound, Stephen
Thomas, Gareth (Clwyd W)


Powell, Sir Raymond
Thomas, Gareth R (Harrow W)


Prentice, Ms Bridget (Lewisham E)
Tipping, Paddy


Prentice, Gordon (Pendle)
Trickett, Jon


Prosser, Gwyn
Truswell, Paul


Purchase, Ken
Turner, Dennis (Wolverh'ton SE)


Quin, Rt Hon Ms Joyce
Turner, Dr George (NW Norfolk)


Quinn, Lawrie
Turner, Neil (Wigan)


Radice, Rt Hon Giles
Twigg, Derek (Halton)


Raynsford, Nick
Twigg, Stephen (Enfield)


Reed, Andrew (Loughborough)
Walley, Ms Joan


Reid, Rt Hon Dr John (Hamilton N)
Ward, Ms Claire


Roche, Mrs Barbara
Watts, David


Rooker, Rt Hon Jeff
White, Brian


Rooney, Terry
Whitehead, Dr Alan


Ross, Ernie (Dundee W)
Williams, Rt Hon Alan (Swansea W)


Rowlands, Ted



Roy, Frank
Williams, Mrs Betty (Conwy)


Ruane, Chris
Wills, Michael


Ruddock, Joan
Winnick, David


Ryan, Ms Joan
Wood, Mike


Salter, Martin
Woodward, Shaun


Sawford, Phil
Woolas, Phil


Sedgemore, Brian
Worthington, Tony


Sheerman, Barry
Wright, Dr Tony (Cannock)


Sheldon, Rt Hon Robert
Wyatt, Derek


Short, Rt Hon Clare



Simpson, Alan (Nottingham S)
Tellers for the Noes:


Singh, Marsha
Mr. David Jamieson and


Skinner, Dennis
Mr. Don Touhig.

Question accordingly negatived.

New Clause 38

PRESERVATION OF RIGHTS IN RESPECT OF ADDITIONAL PENSIONS

'.—(1) In the provisions of the Social Security Contributions and Benefits Act 1992 that are set out in subsection (2) (provisions relating to additional pensions for surviving spouses)—

(a) the references to 5th April 2000 (wherever occurring) shall have effect, and be deemed always to have had effect, as references to 5th October 2002; and
(b) the references to 6th April 2000 (whatever occurring) shall have effect, and be deemed always to have and effect, as references to 6th October 2002.


(2) Those provisions are—

(a) sections 39(3) and 39C(4)(widowed mother's allowance and widowed parent's allowance);
(b) sections 48BB(7), 48C(3) and 51(3) (Category B retirement pensions); and
(c) paragraphs 4(3), 5A(2) and (3) and 6(3) and (4) of Schedule 5 (deferred pensions).

(3) For section 52(3) of the Welfare Reform and Pensions Act 1999 (power to substitute a later year for references to year 2000 in prescribed provisions of the Social Security Contributions and Benefits Act 1992) there shall be substituted—
"(3) The regulations may amend (or further amend) any prescribed provision set out in section (Preservation of rights in respect of additional pensions) (2) of the Child Support, Pensions and Social Security Act 2000 (which sets out provisions falling within subsection (2) of this section) so as to substitute a reference to a later date for—

(a) any reference in that provision to 5th October 2002 or 6th October 2002; or
(b) any reference to a date inserted in that provision by a substitution made by virtue of this subsection."
(4) After section 52(4) of that Act of 1999 there shall be inserted—

"(4A) The regulations may provide, for the purposes of any provision made by virtue of subsection (4), for a case in which a person who, as a consequence of receiving incorrect or incomplete information, did not give any consideration to—

(a) the taking of a step which is a step he might have taken had he considered the matter on the basis of correct and complete information, or
(b) refraining from taking a step which is a step he did take but might have refrained from taking had he considered the matter on that basis,

to be treated as a case in which his failure to take the step, or his taking of the step he did take, was in reliance on the incorrect or incomplete information and as a case in which that step is one which he would have taken, or (as the case may be) would not have taken, had the information been correct and complete."
(5) In section 52(6) of that Act of 1999 (supplemental provisions of regulations relating to the scheme), after paragraph (e) there shall be inserted—
"(ea) prescribing the matters that may be relied on, and the presumptions that may be made, in the determination of whether or not the prescribed conditions have been satisfied;".'.—[Mr. Rooker.]

Brought up, and read the First time.

Mr. Rooker: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss new clause 7—Widows'/widowers' SERPS entitlements—
'In section 52 of the Welfare Reform and Pensions Act, subsections (1) and (2) shall be left out, and there shall be inserted—
(1) The Secretary of State may by regulations make such provision as is authorised by subsection (2) and one or more of subsections (3) to (4),
(2) The regulations may provide for any prescribed provision of Part II of the Contributions and Benefits Act (contributory benefits) which relates to additional pension for widows or widowers to


have effect, in relation to persons of any prescribed description (which shall include at least all those who had reached pensionable age on or before 5th April 2000), with such modifications as may be prescribed for securing—

(a) that any such additional pension, or
(b) in the case of any provision of Schedule 5 to that Act (increase of pension where entitlement is deferred), that any constituent element of an increase provided for by that Schedule,

is increased by such percentage as may be prescribed (which may be 100 per cent, and which shall be 100 per cent for any person who had reached pensionable age on or before 5th April 2000).".'.

Mr. Rooker: During the final stages of the Welfare Reform and Pensions Bill last autumn, we introduced legislative cover that would allow us to address, through regulations, the inherited state earnings-related pension scheme problem. At that time, we had not reached a final decision on what to do. On 15 March this year, my right hon. Friend the Secretary of State announced to the House that we had decided to postpone the change that would halve the amount of SERPS that a widow or widower could inherit until 6 October 2002—a 30-month delay—and to set up the inherited SERPS scheme to provide redress for those who had been misinformed.
We are particularly keen to ensure that all who were misinformed and who might have acted differently had they had the correct information need not lose out. During further consideration of our more detailed proposals and, indeed, with the benefit of the reports of the ombudsman and the National Audit Office, it now seems to us that the powers in the Welfare Reform and Pensions Act 1999 need amending slightly. This Bill, which is already in the parliamentary system, is the ideal place to do it. New clause 38, therefore, provides for the 50 per cent. reduction in inherited SERPS to come into effect in respect of deaths occurring on or after 6 October 2002.
We also want to clarify the eligibility criteria for the inherited SERPS scheme. Currently, section 52 of the 1999 Act provides that the scheme may deal with claims made by people who, having received incorrect or incomplete information about the SERPS reduction, either failed to take any steps they would have taken or took any steps they would not have taken had they received correct information. Yet the ombudsman has pointed out that, 15 years down the road, it will be difficult for many people to demonstrate that they would have taken a particular course of action, or not, had they been correctly advised.
The new clause will ensure that the scheme can provide redress for people who, because they relied on the wrong information, were denied the opportunity of considering taking relevant steps to protect their spouse's pension. I will roughly translate what I have just said as, by and large, replacing "would have" with "might have". In other words, we are loosening up the criteria—we are saying that people might have taken action, rather than that they would have taken action, which is what the Act provides for.
Another point that the ombudsman made was that people should not be unfairly excluded from the scheme because, after so long, they were unable to provide documentary evidence. We want to address that concern, and the new clause allows for the regulations to make further specific provision relating to the manner in which decisions under the scheme may be taken.
New clause 7, in the name of Liberal Democrat Members, would effectively put off the policy change indefinitely for all who are pensioners at 6 April 2000. It is not clear what is intended for people who are still contributors and who might in the future be bereaved. That is not a criticism, but I must put it on the record. If the intention is to provide a lesser amount for them, there will be some contributors, perhaps nearing pension age, and on a low income, who have been misled and would therefore benefit from the scheme proposed. Yet the cost of the proposal, although less than the cost of overturning the policy completely, would still be enormous—probably more than £10 billion over the next 50 years. So under that proposal, we would spend considerably more money without helping some of the people who should be helped.

Mr. Webb: I refer the Minister to his written answer to me of 21 March. Asked the cost of our proposal in lieu of what he has proposed, he replied:
The estimated cost is £7,100 million.—[Official Report, 21 March 2000; Vol. 346, c. 479W.]

Mr. Rooker: I am sure that both figures are correct, but probably do not relate to exactly the same point. In pension discussions—this point arose in Committee—it must be remembered that a change to the national insurance system must be translated over people's working lives. I shall have the figures checked and shall write to the hon. Gentleman if there has been an error. However, I am sure that both figures are correct and deal with slightly different aspects.
Our first principle must be that if the Government gives people the wrong information, they must provide redress. That is what we are doing. All who have been misled are being provided with an opportunity to have their rights restored. The alternative—deferral of the change for 10 or 14 years to reflect the gap between the 1986 legislation and our proposed changes—would merely postpone the problem. The widow of a man who died after that time would still lose out.
Unlike new clause 7, our proposals on the future of inherited SERPS provide the fairest balance between the interests of pensioners and contributors. Full details—I said this at Question Time, but it is important to put it on the record again—of the inherited SERPS scheme will be put before the House. There will be a proper debate, and the details will not be slipped out in the way we have sometimes been accused of. The National Audit Office and the ombudsman will be fully involved in developing the information that we shall ask for and the procedures that will be followed in decision making. We must be certain that we have the powers necessary to cover those points in regulations, and that is why we propose the new clause.

Mr. Willetts: I want to say how grateful we are to the Minister for making it clear that there will be a proper debate. The Chairman of the Public Accounts Committee asked for that after the original statement, and it is right that something of this magnitude should be properly debated in the House.

Mr. Rooker: I am grateful for those remarks. We have gone beyond blame and must think about the future. Obviously, we inherited the current position, but I shall not labour the point. We need consensus across the House


on the way forward on an issue that will affect constituents of all Members over a long period. We want the widest possible support, and that is why we shall ask the NAO and the Parliamentary Commissioner for Administration—the ombudsman—to comment on our proposals and the way in which we intend to operate the scheme. I hope that the House will reject new clause 7, but approve new clause 38.

Mr. Webb: New clause 7 was tabled by the Liberal Democrats, and we see it as consistent with Government new clause 38, but as a measure that goes further. We welcome and support new clause 38, but believe that our additional new clause deserves further consideration.
We welcome the broadening of scope proposed by new clause 38, and the change of phraseology from "could" have to "might" have. However, I find new clause 38 rather bewildering. Can the Minister explain proposed new section 4A of the 1999 Act? It refers to
a person who…did not give any consideration to…
(b) refraining from taking a step which is a step he did take but might have refrained from taking had he considered the matter on that basis
to be treated as a case in which his failure to take the step, or his taking of the step he did take, was in reliance on the incorrect or incomplete information.
And so it goes on, completely impenetrably.
It is hard to see how the Government will convert those words into language that people will understand. There is evidence that the scheme brought forward so far by the Government is already defective. For example, after the Secretary of State's announcement on the matter, newspaper advertisements in the national press said that people would be entitled to claim compensation on inherited SERPS if they "can" show that they were misled.
We have heard a lot of promises from the Secretary of State that it will all be different and better this time, but the first thing he did—almost on the day of his announcement—was to send out 3,000 letters including the wrong telephone number, which did not fill us with confidence. Then he placed newspaper advertisements about the compensation scheme in new clause 38, which said that it would be available for those who can show that they were misled. I think that the Minister will agree that that is not an accurate description of the way the scheme will work. There is no need to be able to show that one was misled; it is necessary only to be able to claim that one was misled in a manner that the Government cannot disprove. The two are very different.
5.30 pm
My hon. Friends tell me that their constituents have telephoned them and said, "It looks as though I won't be covered by the scheme." The people whom the scheme is aimed at have read the advertisements and been misled. They have been confused because the advertisement was wrongly worded. I wonder whether the Minister, when he responds to the debate, will comment on its wording. I do not know whether his officials have briefed him on that.

Mr. Rooker: No, I shall not comment on the advertisement. When the House has approved a scheme, having held debates on the regulations, there will be a full and fairly massive propaganda campaign, using television,

a helpline and advertisements—written and otherwise—and we shall then reflect the scheme that the House has approved. The initial notification of such a scheme, in the recent advertisements, was made, following the statement to the House, because we thought it right and proper to give an initial view that there would be a scheme; I shall not be pedantic about the words. Once we have a scheme to market, it will be thoroughly and properly marketed.

Mr. Webb: The Minister cannot have it both ways. He is spending public money on placing advertisements that are designed to illuminate but which confuse. They were not accurate about the scheme as described by the Secretary of State a few days earlier. I find that very worrying, and I hope that the Minister will ask some questions in his Department about why that form of words was used and whether he should issue some clarification.
We are dealing with people who have already been misled by the Department. Years have gone by, and they have now found out that they were misled. They have now read an advertisement that is also misleading, and they are starting to give up. That is not what we want.
In new clause 7 we propose simply that those who have already reached state pension age by the time the original cut was due to come in should be protected from the cut, for two principal reasons. First, it is unreasonable to expect those who have only just found out about what happened, and who have already reached pension age, to save for their pension. It is too late for that.
A charity dealing with older people says that every year new people come to it for help, having only just heard for the first time about the change as a result of the advertisements and the discussion of the subject in the press. Many people still do not even know about the change, although there has been a great deal of coverage, particularly in the specialist press. It is unreasonable to expect them to make alternative arrangements now. That is why we want to protect them.
The second issue, which has not been addressed much in the debate, is the validity of the original policy. Was it right of the House, in 1986, to decide to halve widows' pension entitlements? New clause 7 gives us an opportunity to reverse that decision for those who have already reached state pension age for whom there is no other alternative. We know that widows make up one of the poorest groups of pensioners. Later we shall discuss the position of older pensioners, most of whom are women, many of whom are widows, who already have relatively dire pension positions.
This afternoon at Social Security questions, the Government—I believe that it was the Minister—attacked what the Conservatives did to the state earnings-related pension scheme; one of their biggest cuts, if he does not accept new clause 7, he is about to implement. How can he have it both ways? He wants to attack the Conservatives for the cuts that they made in SERPS but to implement those cuts, and not reverse any of them, even when he has the chance to do so.
The Minister raised the question of the cost of what we are proposing. The Government have introduced a bizarre new doctrine: they add up all the costs of the compensation over 50 years. They have got into enough trouble by adding up the figures for national health service spending and education spending over three years and double and triple counting, but trying to make out that the


compensation package is generous by working out what it would cost over 50 years is incredible. If the Government make an increase in the winter fuel payment which is to be paid for each of the next 50 years, they do not claim 50 years' worth of expenditure. If they put 75p on the basic state pension, they do not multiply the figure by 50 to say how much it has cost.
I asked for a breakdown of the extraordinarily large figures being claimed for the cost of the scheme. The cost of deferral—which relates to new clause 38—never rises above £270 million a year, yet it has been costed at £2.5 billion: nearly 10 times as much. The compensation scheme has been costed at £5.7 billion if there is a take-up of 30 per cent., yet its cost never rises above £600 million in any of the next 20 years. Although the Minister says that our scheme is extraordinarily expensive, it is only by adding together the figures for 50 years that he can come up with his figure.
As I said in an intervention, our estimate of the cost of our scheme in lieu of the Government's scheme is £7.1 billion. The Government's central costing is £2.5 billion for deferral and just over £5 billion for people who claim compensation, so the total is about £8 billion. We are not inventing enormous items of Government spending. We have come up with a scheme which, on the Government's figures, does not cost as much as the one they have themselves proposed. The Minister said that there would probably need to be some form of tapered provision for those aged 63 or 64, so I suspect that our scheme would cost something similar to the Government's proposal.
The big advantage of our proposal is that it is clear and simple. Under the Government's proposal, pensioners will try to claim that they were misled and the Government will have to investigate those claims and attempt to disprove them. We have no idea how they will disprove the claims because they have no records with which to do so. That scheme will, as ever, miss out the inarticulate and the ill-informed, but will reward the corrupt because, if anyone says that he was misled, that claim cannot be disproved. Their system is costly, bureaucratic and complex and it creates a further worry for all the people who have been affected by the reduction in SERPS. They will not know until next year whether they will be protected.

Mr. David Heath: My hon. Friend will recall that I asked the Secretary of State about receiving information at second hand and not directly from the Department. However, I did not receive a satisfactory answer. New clause 38 refers to
receiving incorrect or incomplete information,
but does not qualify that statement by mentioning the source of the information. Does that not suggest to my hon. Friend that someone who was misled by a professional adviser or another person, but who acted under the belief that he was taking the right steps, would be covered?

Mr. Webb: My hon. Friend raises an important point, and I hope that the Minister will clarify the position. Clearly an adviser will act on the basis of the leaflets and the guidance given him by the Department. If that

information is misleading and is passed on to a member of the public, that member of the public will have been misled in just the same way as if he had received the information at first hand. People misled in that way should be covered and that is how I read the new clause. I hope the Minister will confirm that my reading of it is correct.
Our constituents have been asking us for months and years what will happen. They want to know so that they have can have peace of mind in their old age about the provisions for widows or widowers. We still do not know what will happen and the scheme is so vague that it will be another year before we find out. We want certainty; older people deserve that if nothing else. That is why exempting those who have already reached state pension age is a neat, clean way of approaching the issue. People who did not follow the small print of the Social Security Act 1986—can we blame them?—and who have reached pension age have probably found out only now about the cut in their entitlements. They deserve to be looked after with a clean and simple solution.
We accept new clause 38, because deferral is welcome. However, additional measures, as reflected in new clause 7, would also be welcome. Given the opportunity, we shall seek to test the opinion of the House on the additional measures.

Mrs. Jacqui Lait: I shall be brief, because most points have already been made. However, it is important to clarify even further the degree of evidence and proof that the Government will seek to build into the regulations and their compensation scheme. Although we have accepted responsibility for the part that we have played in the problem, we stick by the policy—as do the Government—of the reduction in the rebates. We shall not, therefore, support the new clause tabled by the Liberal Democrats.
The key to the matter is what degree of evidence of whether people have been misled the Government can accept. For example, one could argue that people who have done nothing to find out about the cut have been misled. Will that be acceptable to the DSS, and will it be covered in regulations? Any sensible person planning for their retirement would, if they had known about the cut, have taken action, and the mere fact that they have not done so indicates that they have been misled.
I welcome the change in the wording of new clause 38 from "would have" to "might have". However, even if the Government are prepared, in regulations, to alter the burden of proof, we need more clarification about what exactly they will do. It is clear that since the first announcements, the debate about recompense has moved on, and I suspect that that is why confusion is developing and the Government's statements are getting softer and softer and are increasingly trying to be helpful to people who feel that they are affected.
The Minister indicated that there will be a proper debate on regulations, and my hon. Friend the Member for Havant (Mr. Willetts) picked him up on that point. This may be nit-picking, but I wonder whether the debate will be in the Chamber or upstairs in Committee. What defines proper debate? This subject is of great interest to everybody, and it might be sensible of the Government to have the debate on the Floor of the House.
I was also slightly concerned to hear that the National Audit Office and Public Accounts Committee will consider the regulations. When does the Minister expect the regulations to be laid before the House? What delay will there be? Is this to be another example of the DSS's use of the word "shortly"? The right hon. Gentleman has castigated others for their use of grammar, but over the past few months "shortly" has stretched into infinity. It would be nice to have an indication of when the Department expects to introduce the regulations.

Mr. Rooker: I must make it absolutely clear that I cannot answer most of the questions that I have been asked. We do not have the scheme yet. It is in the first stages of being designed. We have only just chosen one of the options that we considered. It is not possible to answer the detailed questions that I have been asked.
I shall certainly not use the term "shortly" about any regulations, because I can tell the House that they are not expected shortly. As I said at Question Time, I am not even certain whether they will be introduced before the summer recess or in the autumn—the time scale is as wide as that. They might not be the ideal legislation for the House to consider in, for example, the third week of July, so we might hold them over.

Mrs. Lait: Can I tempt the right hon. Gentleman to say that they will be introduced before October 2002?

Mr. Rooker: Yes, I can definitely say that. If the hon. Lady reads new clause 38 in great detail, she will see that every conceivable contingency—or at least every one that we can think of—has been built into that new clause. However, I cannot answer all the questions.
The hon. Member for Northavon (Mr. Webb) asked me about the figure of £7 billion referred to at Question Time. That is the cost of paying the surviving spouses of all current pensioners 100 per cent. with no policy deferral. The new clause includes the scope to defer for those currently under pension age. All the figures that I am using are global—they have to be—and the only figures that I am prepared to rely on are those on page 39 of the National Audit Office report, because the NAO used our figures to make assumptions. I shall not go into detail about those assumptions now.
The figure of about £10 billion that I quoted earlier assumes that the hon. Gentleman would intend to use those measures and reflects the cost of a 10-year policy deferral. Both figures are right, but the question differs depending on whether one takes account of the policy deferral that we have already announced. The cost of that policy deferral is £2.5 billion—that cost is there before we even start, and we have no idea what the take-up rate will be.
5.45 pm
I have honestly admitted that I cannot answer the questions asked, for reasons that I have explained. None the less, I hope that the House will accept new clause 38.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 33

CALCULATION OF CATEGORY B RETIREMENT PENSION

'.—(1) In section 46 of the Social Security Contributions and Benefits Act 1992 (modifications of section 45 for calculating the additional pension in certain benefits), after subsection (2) there shall be inserted—
"(3) For the purpose of determining the additional pension falling to be calculated under section 45 above by virtue of section 48BB below in a case where the deceased spouse died under pensionable age, the following definition shall be substituted for the definition of "N" in section 45(4)(b) above—
"'N'=

(a) the number of tax years which begin after 5th April 1978 and end before the date when the deceased spouse dies, or
(b) the number of tax years in the period—

(i) beginning with the tax year in which the deceased spouse ('S') attained the age of 16 or, if later, 1978–79, and
(ii) ending immediately before the tax year in which S would have attained pensionable age if S had not died earlier,
whichever is the smaller number."
(2) In section 48BB of that Act (Category B retirement pension: entitlement by reference to benefits under section 39A or 39B) in subsection (5) for "section 46(2)" there shall be substituted "section 46(3)".
(3) In paragraph 5 of Schedule 8 to the Welfare Reform and Pensions Act 1999 (welfare benefits: minor and consequential amendments), sub-paragraph (b), and the word "and" immediately preceding it, shall be omitted.'.—[Angela Eagle.]

Brought up, and read the First time.

The Parliamentary Under-Secretary of State for Social Security (Angela Eagle): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 34, 35, 28 to 32 and 85.

Angela Eagle: The House will be aware that we tabled a number of amendments in Committee relating to the calculation of state second pension and to SERPS. We tabled those amendments in Committee to ensure that time was allowed for adequate scrutiny of the clauses, but the result was that, in some cases, the provisions were not quite right when they were introduced. I explained in Committee that it would be necessary to table some minor amendments to correct or clarify the provisions. The group of amendments makes the necessary changes. I assure the House that the amendments do not represent major changes to the policy and that they are all beneficial to future recipients.
Amendments Nos. 28 and 29 are drafting amendments that clarify the legislation in relation to the calculation of national insurance rebates. They make it clear that the rebates must be calculated by reference to the state second pension given up, either wholly or in part.
We come to the technical subject of earnings factors in SERPS and to amendments Nos. 30 to 32 to clause 36. In Committee, we pointed out that clause 36 was, in effect, a consequential amendment to the Pensions Act 1995, which had been missed at the time it was passed. Among other things, that Act changed the calculation of SERPS from 6 April 2000. However, the regulations that dealt


with part years—that is, years in which people have a mix of both contracted-out and contracted-in earnings—were not changed to reflect the new Act.
The amendment agreed in Committee allowed us to introduce new regulations to put the situation right. However, since the current Bill will not be in force by 6 April 2000, it is necessary to ensure that the new regulations can deal with pension calculations that fall to be made between 6 April 2000 and the coming into force of the new regulations. That is the purpose of the latest amendments. The intention, as we discussed in Committee, remains to bring the regulations up to date and to maintain the status quo with regard to SERPS calculations.
Amendments Nos. 34 and 35 are technical; they correct the method of calculating the amount of state second pension that persons who, in the past, have received widowed parents allowance or bereavement allowance can inherit from their deceased spouse when they reach state pension age. Similarly, new clause 33 and amendment No. 85 correct existing legislation for the purposes of calculating the amount of SERPS that can be inherited in those circumstances.
The new clause and the amendments would restore the policy intention that no one will receive less additional pension with their category B pension, which is based on their late spouse's contributions, than they would have done before the introduction of the new bereavement benefits. No one has been affected to date, because the new bereavement benefits are not due to come into effect until April 2001. With those assurances, I urge the House to accept the new clause and the amendments.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 7

WIDOWS'/WIDOWERS' SERPS ENTITLEMENTS

'In section 52 of the Welfare Reform and Pensions Act, subsections (1) and (2) shall be left out, and there shall be inserted—
"(1) The Secretary of State may by regulations make such provision as is authorised by subsection (2) and one or more of subsections (3) to (4),
(2) The regulations may provide for any prescribed provision of Part II of the Contributions and Benefits Act (contributory benefits) which relates to additional pension for widows or widowers to have effect, in relation to persons of any prescribed description (which shall include at least all those who had reached pensionable age on or before 5th April 2000), with such modifications as may be prescribed for securing—

(a) that any such additional pension, or
(b) in the case of any provision of Schedule 5 to that Act (increase of pension where entitlement is deferred), that any constituent element of an increase provided for by that Schedule,
is increased by such percentage as may he prescribed (which may be 100 per cent, and which shall be 100 per cent for any person who had reached pensionable age on or before 5th April 2000).".'.— [Mr. Webb.]

Brought up, and read the First time.

Motion made, and Question put, That the clause be read a Second time:—

The House divided: Ayes 26, Noes 273.

Division No. 135]
[5.49 pm


AYES


Allan, Richard
Llwyd, Elfyn


Ashdown, Rt Hon Paddy
Maclennan, Rt Hon Robert


Ballard, Jackie
Moore, Michael


Brand, Dr Peter
Oaten, Mark


Breed, Colin
Rendel, David



Russell, Bob (Colchester)


Burstow, Paul
Sanders, Adrian


Cable, Dr Vincent
Taylor, Matthew (Truro)


Campbell, Rt Hon Menzies (NE Fife)
Thomas, Simon (Ceredigion)



Tonge, Dr Jenny


Chidgey, David
Tyler, Paul


Cotter, Brian
Webb, Steve


Foster, Don (Bath)



George, Andrew (St Ives)
Tellers for the Ayes:


Harris, Dr Evan
Mr. Tom Brake and


Kirkwood, Archy
Mr. David Heath.




NOES


Abbott, Ms Diane
Coleman, Iain


Ainger, Nick
Colman, Tony


Ainsworth, Robert (Cov'try NE)
Connarty, Michael


Alexander, Douglas
Cook, Frank (Stockton N)


Allen, Graham
Cooper,Yvette


Anderson, Donald (Swansea E)
Corbett, Robin


Anderson, Janet (Rossendale)
Corbyn, Jeremy


Armstrong, Rt Hon Ms Hilary
Cousins, Jim


Ashton, Joe
Crausby, David


Atherton, Ms Candy
Cryer, John (Hornchurch)


Atkins, Charlotte
Cunningham, Rt Hon Dr Jack (Copeland)


Austin, John



Banks, Tony
Cunningham, Jim (Cov'try S)


Barnes, Harry
Dalyell, Tam


Barron, Kevin
Darling, Rt Hon Alistair


Bayley, Hugh
Darvill, Keith


Beard, Nigel
Davey, Valerie (Bristol W)


Beckett, Rt Hon Mrs Margaret
Davidson, Ian


Bell, Martin (Tatton)
Davies, Geraint (Croydon C)


Benn, Rt Hon Tony (Chesterfield)
Dawson, Hilton


Benton, Joe
Dean, Mrs Janet


Bermingham, Gerald
Dismore, Andrew


Berry, Roger
Dobbin, Jim


Betts, Clive
Donohoe, Brian H


Blears, Ms Hazel
Doran, Frank


Blizzard, Bob
Dowd, Jim


Blunkett, Rt Hon David
Eagle, Angela (Wallasey)


Boateng, Rt Hon Paul
Eagle, Maria (L'pool Garston)


Bradley, Keith (Withington)
Edwards, Huw


Bradshaw, Ben
Ennis, Jeff


Brinton, Mrs Helen
Field, Rt Hon Frank


Brown, Rt Hon Nick (Newcastle E)
Fisher, Mark


Browne, Desmond
Fitzpatrick, Jim


Buck, Ms Karen
Fitzsimons, Lorna


Burden, Richard
Flint, Caroline


Byers, Rt Hon Stephen
Follett, Barbara


Campbell, Mrs Anne (C'bridge)
Foster, Rt Hon Derek


Campbell, Ronnie (Blyth V)
Foster, Michael Jabez (Hastings)


Campbell-Savours, Dale
Foster, Michael J (Worcester)


Caplin, Ivor
Foulkes, George


Casale, Roger
Gardiner, Barry


Cawsey, Ian
Gerrard, Neil


Chapman, Ben (Wirral S)
Godman, Dr Norman A


Clapham, Michael
Godsiff, Roger


Clark, Rt Hon Dr David (S Shields)
Goggins, Paul


Clark, Dr Lynda (Edinburgh Pentlands)
Golding, Mrs Llin



Gordon, Mrs Eileen


Clark, Paul (Gillingham)
Griffiths, Jane (Reading E)


Clarke, Charles (Norwich S)
Griffiths, Nigel (Edinburgh S)


Clarke, Tony (Northampton S)
Grocott, Bruce


Clelland, David
Grogan, John


Clwyd, Ann
Hall, Mike (Weaver Vale)


Coaker, Vernon
Hamilton, Fabian (Leeds NE)


Coffey, Ms Ann
Heal, Mrs Sylvia


Cohen, Harry
Healey, John






Henderson, Doug (Newcastle N)
O'Brien, Mike (N Warks)


Henderson, Ivan (Harwich)
Olner, Bill


Heppell, John
O'Neill, Martin


Hill, Keith
Osborne, Ms Sandra


Hinchliffe, David
Palmer, Dr Nick


Hoon, Rt Hon Geoffrey
Pearson, Ian


Hope, Phil
Pendry, Tom


Hopkins, Kelvin
Perham, Ms Linda


Howells, Dr Kim
Pickthall, Colin


Hoyle, Lindsay
Pike, Peter L


Hughes, Kevin (Doncaster N)
Plaskitt, James


Humble, Mrs Joan
Pollard, Kerry


Hurst, Alan
Pond, Chris


Hutton, John
Pope, Greg


Iddon, Dr Brian
Pound, Stephen


Illsley, Eric
Powell, Sir Raymond


Jackson, Ms Glenda (Hampstead)
Prentice, Ms Bridget (Lewisham E)


Jackson, Helen (Hillsborough)
Prentice, Gordon (Pendle)


Jenkins, Brian
Prosser, Gwyn


Johnson, Alan (Hull W & Hessle)
Purchase, Ken


Johnson, Miss Melanie (Welwyn Hatfield)
Quin, Rt Hon Ms Joyce



Quinn, Lawrie


Jones, Rt Hon Barry (Alyn)
Radice, Rt Hon Giles


Jones, Helen (Warrington N)
Reed, Andrew (Loughborough)


Jones, Jon Owen (Cardiff C)
Reid, Rt Hon Dr John (Hamilton N)


Jones, Dr Lynne (Selly Oak)
Roche, Mrs Barbara


Kaufman, Rt Hon Gerald
Rooker, Rt Hon Jeff


Keeble, Ms Sally
Rooney, Terry


Keen, Alan (Feltham & Heston)
Ross, Ernie (Dundee W)


Keen, Ann (Brentford & Isleworth)
Rowlands, Ted


Kelly, Ms Ruth
Roy, Frank


Kemp, Fraser
Ruane, Chris


Kennedy, Jane (Wavertree)
Ruddock, Joan


Khabra, Piara S
Ryan, Ms Joan


Kidney, David
Salter, Martin


King, Andy (Rugby & Kenilworth)
Sawford, Phil


King, Ms Oona (Bethnal Green)
Sedgemore, Brian


Laxton, Bob
Sheerman, Barry


Lepper, David
Short, Rt Hon Clare


Leslie, Christopher
Simpson, Alan (Nottingham S)


Levitt, Tom
Singh, Marsha


Lewis, Terry (Worsley)
Skinner, Dennis


Liddell, Rt Hon Mrs Helen
Smith, Rt Hon Andrew (Oxford E)


Linton, Martin
Smith, Angela (Basildon)


Lock, David
Smith, Jacqui (Redditch)


Love, Andrew
Smith, John (Glamorgan)


McAvoy, Thomas
Smith, Llew (Blaenau Gwent)


McCabe, Steve
Soley, Clive


McDonagh, Siobhain
Southworth, Ms Helen


Macdonald, Calum
Spellar, John


McDonnell, John
Squire, Ms Rachel


McFall, John
Steinberg, Gerry


Mackinlay, Andrew
Stevenson, George


McNulty, Tony
Stewart, David (Inverness E)


Mactaggart, Fiona
Stewart, Ian (Eccles)


McWalter, Tony
Stinchcombe, Paul


McWilliam, John
Stoate, Dr Howard


Mahon, Mrs Alice
Straw, Rt Hon Jack


Marsden, Gordon (Blackpool S)
Stringer, Graham


Marsden, Paul (Shrewsbury)
Stuart, Ms Gisela


Marshall, Jim (Leicester S)
Sutcliffe, Gerry


Marshall-Andrews, Robert
Taylor, Rt Hon Mrs Ann (Dewsbury)


Maxton, John



Meacher, Rt Hon Michael
Taylor, Ms Dari (Stockton S)


Michie, Bill (Shef'ld Heeley)
Taylor, David (NW Leics)


Miller, Andrew
Thomas, Gareth (Clwyd W)


Moffatt, Laura
Thomas, Gareth R (Harrow W)


Morley, Elliot
Touhig, Don


Morris, Rt Hon Ms Estelle (B'ham Yardley)
Trickett, Jon



Truswell, Paul


Mountford, Kali
Turner, Dennis (Wolverh'ton SE)


Mullin, Chris
Turner, Dr George (NW Norfolk)


Murphy, Denis (Wansbeck)
Turner, Neil (Wigan)


Murphy, Jim (Eastwood)
Twigg, Derek (Halton)


Naysmith, Dr Doug
Twigg, Stephen (Enfield)


Norris, Dan
Walley, Ms Joan





Ward, Ms Claire
Wood, Mike


Watts, David
Woodward, Shaun


White, Brian
Woolas, Phil


Whitehead, Dr Alan
Worthington, Tony



Wright, Anthony D (Gt Yarmouth)


Williams, Rt Hon Alan (Swansea W)
Wright, Dr Tony (Cannock)



Wyatt, Derek


Williams, Alan W (E Carmarthen)



Williams, Mrs Betty (Conwy)
Tellers for the Noes:


Wills, Michael
Mrs. Anne McGuire and


Winnick, David
Mr. David Jamieson.

Question accordingly negatived.

New Clause 8

AGE ADDITIONS

'For section 79 of the Social Security Contributions and Benefits Act 1992 there shall be substituted—
"79.—(1) A person who is above the specified age and who is entitled to a retirement pension of any category shall be entitled to an increase of the pension, to be known as 'age addition'.
(2) Where a person is in receipt of a pension or allowance payable by the Secretary of State by virtue of any enactment or instrument (whether passed or made before or after this Act) and—

(a) he is above the specified age; and
(b) he fulfils such other conditions as may be prescribed,

he shall be entitled to an increase of that pension or allowance, also known as age addition.
(3) In this section 'specified age' means an age specified by the Secretary of State in regulations.
(4) Age addition shall be payable for the life of the person entitled, at weekly rates to be determined by the Secretary of State in regulations.
(5) Regulations under this section may—

(a) specify one or more specified ages at which age addition shall be payable;
(b) provide for different rates of age addition to be payable for persons of different specified ages.".'—[Mr. Burstow.]

Brought up, and read the First time.

Mr. Paul Burstow: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss new clause 36—Annual increase in basic retirement pension—
'.—The Secretary of State shall each year increase the basic retirement pension by not less than an amount equivalent to—

(a) the percentage increase in the general level of earnings during the preceding year; or
(b) the percentage increase in the retail prices index during the preceding year,

whichever is the greater.'.

Mr. Burstow: We believe that the quickest and most cost-effective way of getting help to many of our poorest pensioners is via the basic state pension. We hope, though, that the campaign that was finally launched by the Government last week, amid much publicity, to promote the take-up of the minimum income guarantee is a success. Who would not want to see between 530,000 and 870,000 of our fellow citizens who are entitled to the minimum income guarantee getting it? The sad fact is that


those pensioners and many others are living below the poverty line. We must make sure that we get help to them in the most effective way.
We know from the Government's research that the success of the campaign that they have just launched is finely balanced. It will be tough for the Government to deliver a substantial increase in the uptake. A report published by the Government last year, entitled "Helping Pensioners—A Contextual Survey of Income Support Pilots", found that four out of 10 pensioners said that they would definitely claim as a result of the campaign. That is great.
We welcome the fact that four out of 10 pensioners would claim the minimum income guarantee. Another 18 per cent. said that they would probably claim. Most important and disturbing, however, was the fact that a further 36 per cent. said that they would not claim. They cited a number of reasons why they would not claim. The research reports a feeling of stigma, uncertainty and unwillingness to deal with benefits offices. The report details in considerable depth pensioners' concerns and the reasons why they were not keen on going down the means-testing route.
We know from parliamentary questions and statements from Ministers that the Government accept that the largest group of pensioners missing out on the minimum income guarantee are older women. Given that the evidence about income distribution on the basis of age suggests that the oldest pensioners are our poorest pensioners, why do we not consider ways of ensuring that they do not have to fill in any forms to get additional income into their purses?
We believe that a cost-effective and stigma-free way of doing that would be to lift the basic state pension through further age additions. A precedent already exists. There is an age addition to the basic state pension when the pensioner reaches the age of 80. It was set at 25p in 1971, and has been frozen at 25p ever since.
Hon. Members in all parts of the House know from meetings with pensioner groups in their constituencies that that 25p is a source of anger and frustration. Why on earth has it not been increased in all this time? There is no good answer to that. It is simply wrong that there has been no increase. If the sum had been indexed to earnings, it would now stand at £3.70 per week. More should have been done to uprate that figure, year on year. In our view, the age addition at the age of 80 should be set at £5.
We believe that a new age addition should be introduced into the basic state pension at the age of 75. That would mirror the Government's recognition of the need for age additions. The only problem is that the Government have decided to attach age additions to the minimum income guarantee. Attaching an age addition to the basic state pension would provide a cast-iron guarantee that the money would find its way into pensioners' pockets. That is why our new clause proposes age additions to the basic state pension.

Mr. Bercow: I am grateful to the hon. Gentleman for giving way. Given his specific recommendations, why do he and his hon. Friends propose—rather feebly, if I may say so—in new clause 8 that in future the detail should be dealt with via regulation?

Mr. Burstow: Unless the hon. Gentleman wants us to have to move amendments to primary legislation every

year to uprate the figures, it would be nonsense for Parliament to deal with the matter in that way. Our proposal signals the need for a proper mechanism for annual upratings. Given the hon. Gentleman's interest, I am sure that he will support the new clause now that I have explained that important feature.
New clause 36, tabled by other hon. Members, gives us an opportunity to debate the future of the basic state pension. Our view is that age additions which targeted guaranteed additional income on older pensioners would ensure that the basic state pension had a future purpose, which it otherwise will not have because successive Governments have allowed its value to be eroded against earnings.
Whereas in 1980 the basic state pension was worth 22.6 per cent. of average earnings, by 2050 its value will be about 6 per cent. of average earnings. Age additions are undoubtedly the way forward, but we should take the opportunity of today's debate to signal the importance that the House attaches to the basic state pension.
A rally was organised a few weeks ago in London by the Greater London Forum for the Elderly to express its concern. People carried coffins to symbolise the demise of the basic state pension. That is a measure of what pensioners feel has happened to the basic state pension. The earnings link was broken by the previous Government, and has not been restored by the present Government. Many, many pensioners think that the earnings link should have been re-established.
We know that at the general election, the Government included in their manifesto a commitment to establish a different sort of link, based on growth in the economy. Since the general election, that has not happened. This year there was an indexation on the basis of prices, which has given pensioners only an additional 75p in their basic state pension in the coming year.

Mr. Christopher Leslie: Did the Liberal Democrat manifesto commit the party to re-establishing the link with earnings?

Mr. Burstow: The hon. Gentleman is not asking an awkward question; he is asking one that I am happy to answer. We did not commit ourselves to re-establishing the link. [Interruption.] If the hon. Gentleman will allow me to continue, I can explain that we continually review the matter, as do the Government. However, the Government have departed from their manifesto commitment and left our poorest pensioners with even less than they would receive if the Government had honoured the commitment to link the basic state pension to growth in the economy. No one can claim that 75p is a proper reflection of the growth in the economy.

Mr. David Winnick: The hon. Gentleman is courteous in allowing hon. Members to intervene in his speech. He made it clear that the Labour manifesto stated that the state pension should be uprated only in relation to prices. Does he accept that our manifesto did not mention winter heating additions or free television licences, which we have provided? Some of us have campaigned for that for years. It is a tremendous benefit to pensioners. Does the hon. Gentleman accept that?

Mr. Burstow: I congratulate the hon. Gentleman on his campaigning and on the success that he believes that


he has secured. However, we believe that age additions constitute the most cost-effective way of helping our poorest pensioners. We have said that time and again, and our view was reflected in the amendment that I tabled initially. It is the most effective way of using the basic state pension.
We have lately been worried about some of the comments that several Ministers have made from the Dispatch Box about channelling additional resources through the basic pension. They suggest that, because the benefit is taxable, it is somehow inappropriate to use it to target our poorest pensioners. Again, that is nonsense. Taxing the basic pension allows the richest of our pensioners, who are in the minority, to perceive that redistribution is taking place. What is wrong with that? Targeting money through the basic state pension is sensible.
The incomes of the richest fifth of pensioners rose by £87 a week between 1979 and 1997, while those of our poorest pensioners increased by only £10 in the same period: 18 years of Conservative rule and only £10 in the pockets of the poorest pensioners to show for it.
New clause 36 provides a useful opportunity to send a clear signal that the House believes that the basic state pension has a role as a key foundation stone of support for our poorest pensioners. That role should continue well into this century and beyond. The basic state pension should not leave pensioners in poverty, but should provide a reasonable standard of living.

Dr. Lynne Jones: I support new clause 8, which the hon. Member for Sutton and Cheam (Mr. Burstow) moved, and new clause 36, which would uprate the basic state pension. I am a little shocked to be called, because I anticipated that my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell) would be called first, to speak to new clause 36.
Our manifesto commitment gives the reason for the importance of uprating the basic state pension: the state retirement pension should remain the foundation of pensions provision. As I said at Question Time, in 1980 the basic state pension was approximately 23 per cent. of average earnings; the figure is now much lower. It is anticipated that by the time the Government's reforms are in place, the state pension will be worth about only 14 per cent. of average earnings. How can we have a foundation that is being washed away year after year? The Government's recent publication "The Changing Welfare State" provides a graph, which shows that in 2051 the basic state pension will be worth the equivalent of £25 a week at the rate of average earnings in 1999. How can the state pension thus be a foundation?
6.15 pm
The Government propose to introduce a state second pension, which will supplement the basic state pension. It is being promoted as a replacement for the state earnings-related pension scheme which will redistribute money to those on lower earnings and is therefore more generous than SERPS. That is true, but the combination of the state second pension and the erosion of the basic state pension will result in the pension constituting approximately 21 per cent. of average earnings in 2051, compared with a bigger proportion—23 per cent.—in 1980. The state second pension is a substitute not for SERPS but for uprating the basic state pension properly.
The Government are trying to tackle means-tested benefits; they are introducing the state second pension to try to ensure that people retire on incomes that are above means-tested benefits, but it will not work. The Government's figures in "Opportunity for All" show that after a lifetime of working, those who earn £300 a week will get only £16 a week more than they would receive if they relied on income support. A woman with caring responsibilities would receive £9 a week more than she would get if she relied on income support.
We are creating disincentives to saving for retirement and taking out additional pensions. Parliamentary questions have shown that in 12 years and nine years respectively, the two individuals I cited would be back on means-tested benefit after a lifetime of work. We must tackle the nonsensical position whereby a means-tested benefit is far higher than the basic state pension. The proposal to uprate the retirement pension in line with earnings will ensure that the difference will not become even greater and that the disincentive will not increase.
The Government say that additional increases to the minimum income guarantee target resources at the poorest. However, that is not the case. The poorest do not apply for the minimum income guarantee. I am pleased that the Government have a campaign to increase take-up, and I hope that it is successful. However, there is a marked reluctance among pensioners to apply for what they perceive to be a handout. People understand that they contribute to the basic state pension through a lifetime's work, or caring responsibilities such as bringing up children or looking after disabled people. They should be entitled to a reasonable state retirement pension at the end of that period.
We should not forget that although the money will go to those who are better off, the pension also targets those who are only slightly above the level of income support. Those people feel most aggrieved that, after accumulating modest savings, and perhaps having an occupational or private pension, they are only a few pounds a week better off than they would be through relying on income support. They feel that they would have been better off spending the money when they were younger.
The Government have made welcome moves to increase the savings that can be built up before benefit starts to be lost and I know that they are considering tax credits, but whatever they do there will still be a cut-off point at which people will feel that they might as well not have bothered to put money aside for their retirement. Having such a disincentive in the system affects people's behaviour, and many of those on modest incomes would be better advised not to save for their retirement and not to build up pensions, but to make sure that they spend their money on a well-built, well-insulated home and other possessions that they will not have to buy in their retirement.
If people's behaviour is affected in that way, more will rely on means-tested benefits. Although the Government say that they want to reduce such reliance, they already predict that the number of people on them will increase. That was the conclusion of the pension provision group—an independent body set up by them to advise on their pensions policy—and its submission to the Green Paper predicted that although the reforms would reduce the number on means-tested benefit to a lower level than if there were no change, more pensioners would need means-tested benefit than at present. It is predicted that


one in four will rely on income support, as compared with one in five today, and that number could increase if there is a further disincentive to save and to opt for additional pension provision.
During their years in government, the Tories learned that the more they tried to target benefit on the poorest, the more the social security budget grew. Our new clause aims to restore the incentive to top up the basic state provision with private provision and, in the long run, that will be the most effective and efficient way to spend public money. I beg to move new clause 36.

Mr. John McDonnell: With some surprise, I, too, beg to move new clause 36, which stands in my name and in the names of many others, some of whom are on Council of Europe duty and send their apologies.

Deputy Speaker (Mr. Michael J. Martin): Order. To assist the hon. Gentleman and the hon. Member for Birmingham, Selly Oak (Dr. Jones), the lead new clause has been moved and he will be able to move his new clause formally when we reach the appropriate stage.

Mr. McDonnell: I am grateful for your advice, Mr. Deputy Speaker. I ask for a separate vote on our new clause, with your permission, because this is a matter of considerable concern in the House and in our communities. My hon. Friend the Member for Islington, North (Mr. Corbyn) has sought to legislate on it on 12 occasions and, more recently, my hon. Friend the Member for Blaenau Gwent (Mr. Smith) initiated an Adjournment debate on it.
Our new clause is simple and straightforward: it would restore the link between increases in pensions and increases in earnings that was established by a Labour Government in 1975. There had been years in which there was no increase in pensions at all, but we secured not only increases that protected pensioners against the erosion of their pension by inflation, but the earnings link. We wanted to ensure that pensioners shared in the wealth of our community as it developed and thought that the best indicator was average earnings. We decided that, if everyone's income increased, so should that of pensioners. I would rather establish a link between pensions and the biggest bonus in the City, but that is too moderate.
The link was broken in 1980 by the then Prime Minister, Mrs. Thatcher, and there was an angry response from the community and especially from Labour Members of Parliament. We gave a commitment to address the issue. As a result of the link being broken so many years ago, Age Concern and others calculate that pensioners have lost £30 a week and, as my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) said, the pension represents only between about 21 and 25 per cent. of average earnings, which is significantly less than the pensions paid by many of our European partners.
Pensioners feel that they were robbed by the break of the link because for nearly 20 years Labour Members told them that they had been robbed. There was a £2 increase

in pensions before the 1992 general election and a Labour spokesperson stood up in the House to call it
miserly… not even enough for a pound of sausages and a couple of loaves, while workers on average pay are receiving increases of more than £20 a week and some executives increases of more than £2,000 a week.
I do not want to embarrass hon. Members—that is not my purpose—but another hon. Member said that
we cannot get a decent link for pensioners …—[Official Report, 21 October 1991; Vol. 196, c. 645–651.]
He wanted it to be restored and to be based on the pay of Members of Parliament. I do not want to embarrass the Minister of State, Department of Social Security, my right hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker).

Mr. Llew Smith: Some days back, Lord Falconer said that he could live on current pension levels. I have to admit that I could not. Could my hon. Friend?

Mr. McDonnell: Not only could I not live on the current pension, but I find it difficult to understand how many of my constituents do so and stave off poverty. I see that week by week in my constituency. The poorest groups in our society are those with young children and people with disabilities. We are trying to tackle the problems; this is a life-and-limb issue not only for the poor, but for the elderly. How many pensioners will die of hypothermia this year because they cannot afford decent heating for their homes?

Ms Diane Abbott: Is the right hon. Member for Birmingham, Perry Barr, to whom my hon. Friend referred, the same Member who sits on the Front Bench and speaks for the Government on pensions policy?

Mr. McDonnell: As I said, it is not my duty to embarrass Members.
The inflation link this year will produce a 75p a week increase, but for most of my constituents that will be wiped out by council tax increases of 7 per cent. and above. As a result, they will be steeped in poverty and will sink further into it.
The Government's record on pensions in all other respects is superb and I pay tribute to Ministers for what they have done. The fuel allowance has been increased from £100 to £150, which is excellent. We promised to reduce value added tax on fuel and we have completed that. We have restored eye tests, given free television licences to over-75s and increased capital sums for those who have saved. We are introducing concessionary fare schemes across the country and have offered free entry to museums and other facilities. That represents a superb record and I cannot understand why the Government are so resolute in refusing to budge on the basic pension demand. There is anger among pensioners at the 75p increase and, unfortunately, it is not assuaged by those other benefits.

Mr. Paul Tyler: Does the hon. Gentleman accept that the poorest pensioners are particularly angry because income tax cuts are helping the


better off, most of whom pay no income tax at all? Combined with council tax increases and a small increase in the basic pension, that is particularly frustrating.

Mr. McDonnell: A number of factors increase anger among pensioners, particularly poor pensioners. They feel that there is unfairness in society that goes against all that we stand for in the House and in the country. I draw on the Prime Minister's speech about British values of fairness and tackling hardship together. The Government's stance runs against all that we are saying about those values.
We have had this debate time and again, and Ministers have reiterated their argument that the Government is targeting resources to help the poorest pensioners through the minimum pensions guarantee. The Government are trying to direct resources at the poorest pensioners, but as my hon. Friend the Member for Selly Oak said, many pensioners continue to face the prospect of having to rely on a means test to gain access to the basic minimal level of financial support.
6.30 pm
Forty per cent. of pensioners rely on means-tested benefits. As my hon. Friend the Member for Blaenau Gwent (Mr. Smith) said in an earlier debate, it is estimated that more than 750,000 people do not claim those benefits. Why? Because it is difficult to claim, although I welcome and support the Government's initiative on take-up. Such campaigns will be run in my constituency and elsewhere to ensure that people get what they need.
People do not claim their entitlement partly because of the stigma attached to means-tested benefits. Anyone who has experienced a means test, or has a family folk memory of the means test from days gone by, realises the implications. People suffer a loss of dignity—the indignity of having to go through a means test.
We should recognise the distinction between pension and benefit. A pension is paid in return for either a financial contribution or a service contribution, as with a war pension. A benefit retains the link with beneficence and paternalistic donations. People do not receive it as of right, but are subject to a test. I thought that my party stood for universal benefits as a right.
We should consider an across-the-board increase in benefits. It is argued that they would also go to the richest pensioners, but there is a simple solution to that—tax them. The question is simple: do we target or do we tax? I believe that universal benefits are more efficient for the reasons that have been identified.

Mr. Alan Simpson: It is not just a choice between tax or benefits. It would be perfectly compatible with Labour manifesto commitments to alter the thresholds so that the better-off would not be the beneficiaries, but the poorest off would not lose out. That is what many members of the Labour party and the general public believed we were saying in our pledges that referred to increasing pensioners' share of the nation's wealth.

Mr. McDonnell: Exactly. The mechanism that we have identified is relatively simple. If we distribute the benefit, we maximise take-up. If we feel that that is expensive, we take it back through redistribution. Targeting puts the poorest pensioners at risk, because they may not receive

the benefit that they desperately need. Taxation makes certain that resources reach those who need it, and those who can pay back do so.
It is curious that the Government have accepted universality on the fuel allowance and free television licences, and they have even linked the minimum income guarantee to increases in earnings.

Mr. Llew Smith: And the NHS.

Mr. McDonnell: As my hon. Friend says, the NHS is a universal benefit for us all. As we have identified in previous debates, the cost of administering a universal benefit is much cheaper than the heavy burden of means-tested benefits.

Mr. Jeremy Corbyn: Is my hon. Friend aware that the cost of administering the state pension is about 1.5 per cent. of its value, whereas the cost of administrating most means-tested benefits is between 20 and 25 per cent. of their value? Can it not be argued that universal benefits save a great deal of money?

Mr. McDonnell: I think that the expression is QED.
There has been a debate in the House about the political implications of the Government's actions for voters who put us in power with such a large majority. In an earlier debate, some people said that pensioners could not vote for anyone else. No, they cannot. They would not vote for the Tories, and I am not sure who else they could vote for, but they could stay at home. They may not deliver our leaflets for us, and they may not vote. They feel a sense of betrayal—I do not like using that phrase, but it has been used enough times in the debates that we have had with pensioners groups in our community. Pensioners always looked to the Labour party as the champion of their cause.
There are 11 million pensioners in this country. They consider that they created the welfare state from which my generation benefited, and which gave us life chances that we have used to provide for our families and to give them a good quality of life. We are now denying many of those pensioners that quality of life in their retirement.
We should refer to the Prime Minister's sense of fairness. He talked about fairness in tackling poverty and reward for hard work. We should honour the undertakings that we gave to successive generations of people who voted Labour because they thought that we were their champions. I gave an undertaking to the pensioners in my community that I would do all I could to lift the basic pension at every opportunity. I want to fulfil that commitment today, so I shall press new clause 36 to a Division, and I shall vote for it.

Mr. Robertson: I want to make a brief contribution to this debate. I suspect that, at the end of it, I may be persuaded to abstain, but that does not mean that I do not have strong feelings on this subject.
At the general election, I went to house after house and met many pensioners who fell into one of two categories: those who said that they did not have enough money to live on—they perhaps did not bother or were not persuaded to claim the other benefits available to them; and those who said that, after years of saving and paying into occupational schemes, they did not feel better off.
My concern is that the minimum income guarantee offered by the Government will not satisfy either of those groups. It will not satisfy many people in the first group, because they will not be persuaded to claim what they regard as a state handout. For many years of their working lives they have paid into the system and are entitled to claim from the state, but they do not see it that way. At a time when the Government Actuary accepts that there is a surplus in the national insurance fund that is likely to grow, it seems mean-minded of the Government not to offer help to those people.
The minimum income guarantee will not help pensioners who have been able to put money away for their retirement. They may have saved money or joined occupational schemes. They will continue to be aggrieved because they will think that they should be better off, but they will not feel better off for having saved because they will be no better off than the pensioners who claim every state benefit to which they are entitled. I do not think that the Government's actions will help either of those categories of pensioners.
I would like more help to be given to pensioners who are retired now. I draw a distinction between those who are retired now and those who will retire in the future. If I am fortunate enough to catch your eye on the next group of amendments, Mr. Deputy Speaker, I shall explain my thinking on that in greater depth. I recognise the enormous projected future costs of the state pension scheme. According to the figures from the House of Commons Library, serious problems will befall us if we do not address that issue.
I want a complete reform of the pensions system for pensioners who are yet to retire. There is no excuse for people of my age who are on a reasonable income not to make provision for their future. However, those who are retired now deserve a better deal from a Government who claim that the economy is in such robust shape. People in manufacturing industry may disagree with and object to that statement, but having looked at the figures and questioned the Secretary of State in the Select Committee, I believe that people who are retired now could get a better deal from the Government.
I shall probably abstain on these new clauses, because they are open-ended and commit Governments to expenditure that I do not believe is sustainable in the longer term. I want reform of the pension system for those who are not yet retired.

Mr. Burstow: The hon. Gentleman has told the House that he will abstain on both new clauses because they have open-ended commitments. However, his hon. Friend the Member for Buckingham (Mr. Bercow) pointed out that no specific figures are given. I answered him by making the simple point that that will be dealt with through regulation, so the House will be able to decide on the levels year on year. Surely the hon. Member for Tewkesbury (Mr. Robertson) could support such a motion to put down a marker.

Mr. Robertson: I admire the hon. Gentleman both for tabling the new clause and for that intervention, but, if I may say so, the new clause demonstrates rather muddled thinking and a typical Liberal Democrat wish to have it

both ways. At the time of the general election, no commitment was made to do other than raise the basic state pension by more than the retail prices index. That is what the Government have done, and that is what has led to all the objections from pensioners. That is how the 75p increase came about.
New clause 8 is open-ended. New clause 36 is similarly open-ended, in that it ties the Government down to a certain level of spending. Those who study the figures will become very alarmed by them.
I have some sympathy with what is being proposed. I could have refrained from speaking in the debate—[Interruption.] Liberal Democrat Front Benchers chuckle, but it would have been easy for me to say nothing. I believe that there should be a better deal for pensioners who have already retired, but I also believe that we should think much more deeply about how pensioners of the future should be catered for. The state pension requires a great deal of radical thought, and it should not be a matter of party politics. It is too important for that.

Mr. Tony Benn: I rise to support my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell), and to look back a bit at the history of the issue. This is the centenary of the foundation of the Labour party. When Keir Hardie arrived, he demanded unemployment pay, and they laughed at him. "Work or maintenance," he said. "Wholly unrealistic: open-ended commitment," he might have heard in response.
I campaigned in 1945, when Labour won the election. The first thing that the Government did was raise the widow's pension from 10 shillings to 26 shillings a week, when we were absolutely bankrupt. They did not have the money, but they had the will. What is lacking now is not the money, but the will. Later, the Cabinet—I am proud to have been a member of that Cabinet, in the days of what is now dismissed and rubbished as old Labour—linked pensions with earnings. That constituted a recognition of the point made by my hon. Friend the Member for Hayes and Harlington that those who contribute to the increased wealth that we now enjoy are entitled to some part of that wealth. After all, pensioners looked after their children when they were young; it is not abnormal to expect the new generation to help the old.
People forget that we are talking about a national insurance scheme. Let us take an example: there must be such cases. A man starts work at the age of 16, works for 50 years, never marries, is never unemployed, is never ill, and dies the day after his 65th birthday. He has poured money into the national insurance scheme, and has received nothing from it. What frightens me about the Government's argument is the use of the word "target". It is an aggressive word, which is normally used in wartime: people say that they will target this and target that. Moreover, once people introduce the idea of targeting, they are really saying that the whole principle of the welfare state must be rewritten.
Why should the wealthy be able to call on the police when they can afford to pay for their own policing? Why should the wealthy be allowed to use the national health service, when they can afford to pay for their own health care? Why should the wealthy be allowed to call in the fire brigade, rather than returning to the old system of insurance? Under that system, those who were insured had a plate put on their houses and, if a house was on fire,


the insurance company would put the fire out. It is the principles underlying the Government's argument that I find difficult.
It would not take long for the Government to say that they were targeting the poorest patients. That would mean saying, "If you need health care, we will help you, but you will be means-tested before you are given your operation." People would be means-tested before they went to school. They are already means-tested before they go to college. It is a question of will and philosophy. We are told every day that the Government's values are the same as the historic Labour values, but I am afraid that they are not.
I have been a pensioner for 10 years today. The pensioners who come to my surgery are really angry. Let us make no mistake about this: people who have voted Labour all their lives say, "No one takes any notice of us. We cannot withdraw our labour, because we have already retired." They welcome the free television licences, the extra heating allowances and all the other little things, but some older pensioners remember the means test in the 1930s, when a man would be given some money only if he sold the piano. Not many people will remember that, but we hear stories about it.
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The whole idea of targeting is wrong. The pension is a benefit as of right: people pay for it while they are working. Moreover, as my hon. Friend the Member for Islington, North (Mr. Corbyn) said, the administrative costs are almost nothing, because everyone receives the pension—which also means that people do not experience the humiliation of having to expose their finances to some probing officer.
Income support, or what used to be called national assistance, is a safety net, which is entirely different from a benefit as of right. We do not want old people to feel that they are on probation. Pensioners have said to me, "I feel as if I have committed an offence. I must open my books before I can have enough to live on."
I urge the Government to think again. I know that there is a shortage of money, but I think that a shortage of will is the real problem. The health service was set up when we were bankrupt, and there were no charges for that. I am the last Member who sat in this place when Aneurin Bevan was Minister for Health and I heard his resignation speech when prescription charges were introduced. If we are not careful, in the name of modernisation, we shall erode what we are all about—the idea of a national insurance scheme with universal benefits.
A progressive income tax is about asking richer people to pay more to keep that scheme going. I am in favour of asking such people to pay more. I do not see why we should ring-fence the rich, and say that, whatever the Labour Government do, they will never ask the rich to pay more, because they will not increase income tax—but, of course, poorer people will be targeted and supervised and watched.
I merely want to convey some of the disappointment, disillusionment, anger and frustration that is felt about the way in which this has been handled. The Government would be ill-advised to disregard my argument, because it is one that will also have to be tackled on polling day.

Mr. Frank Field: I want to echo what hon. Members on both sides of the House have said about the view of many pensioners on our record so far.
Labour Members have rightly congratulated the Government on much of what they have done, which has significantly increased the income of some pensioners. The winter fuel allowance has been increased to £150 a week: that is a significant increase. [HON. MEMBERS: "£150 a year."] I mean £150 a year, but I hope that, after a few more Parliaments, what I said will come about. We also welcome the free television licences. However, it would be wrong for Ministers to assume that those two significant moves have reduced the genuine sense of grievance felt by many pensioners, a number of whom are extremely poor.
Although the minimum income guarantee may help many pensioners, it will not help all of them, and it has led to a number of grievances—as my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) pointed out—on the part of people who have saved, and have managed to save only small amounts or could acquire only small additions to their company pension schemes. Those people are disqualified from the minimum income guarantee, although their income is less than that of others who qualify for income support and receive the guarantee.
I received two letters recently—neither from a constituent. One came from a pensioner, who, as a widow, went back to work and acquired a small pension. She is £7 a week worse off than her neighbour, who did not acquire a smaller pension but who qualifies for the minimum income guarantee. She does not begrudge her neighbour that—her neighbour might well have saved a little, as the letter suggests, but did not do so—but she does not feel that she should be penalised.
The second letter was from a pensioner in the east end. As she, too, receives a small work pension, she is not eligible for the minimum income guarantee. She is paying full rent and full council tax. After paying those two bills, she is left with £14.50 a week to pay for everything else. We would be foolish to think that there is not—to put it most gently—real concern about the issue not only among voters generally, but among some pensioners.
As Dr. Johnson—like my right hon. Friend the Member for Chesterfield (Mr. Benn), although in different words—said:
when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.
The Dissolution of Parliament is the hanging process in which we have to go back and face our voters. At this point in the Parliament, there is much in their pension's record for which we can give the Government credit, but I hope that we will not be fighting the next general election only on that record. The two new clauses in this group have been tabled to expand on that record.
The Government always have to think about how £1 billion should be spent. As my hon. Friend the Member for Selly Oak said, generally speaking, and for obvious reasons, the older the pensioner, the poorer he or she will be. If they have savings, they will have had to eat into them to ensure their own survival. Older pensioners have had less opportunity to make higher wages and to save greater sums, and they have had less chance of joining a company pension scheme. Therefore, although some older pensioners are—thank goodness—well placed, generally speaking, older pensioners are the poorest.
When the debate ends, I hope that many hon. Members will vote for new clause 8. I say that not because I disagree with the sentiments that have been expressed—


or that we shall hear expressed later—on the general need for an increase in the state pension, but because I believe that the Government could most effectively use any given sum by significantly increasing the state pension for the oldest pensioners. However, as Labour Members have already said, it will not be adequate for us to go into a general election with only one single such action. We require a medley of actions to improve significantly the position of those pensioners who have not been able to include themselves in the bracket of those who are "well placed".
For 20 years, when Labour was in opposition, I did not agree that we should increase the state pension in line with earnings. I am not likely now, when Labour is in government, to have a Pauline conversion on the matter—although I appreciate the strength of feeling on the issue of those who have always believed that the pension should be increased in line with earnings. However, I hope that Ministers, especially those who are arguing that we should do even more for pensioners, will use this debate to strengthen their hand—so that when we are "hanged in a fortnight" at the hands of the electorate, our pensions record is even better than it is now.
The standard of living of some of our constituents is disgraceful, and any human being in our community should not have to survive in that way. The issue is urgent, and it will be pressed in the Lobby. However, when we press it, we shall do so to strengthen the hand of Ministers who are arguing not that all is fine on the western front, but that much more needs to be done.

Mr. Corbyn: A few weeks ago, at Congress house, in Great Russell street, the hon. Member for Sutton and Cheam (Mr. Burstow) and I addressed a conference of the Greater London Forum for the Elderly. It was a marvellous occasion, which was attended by more than 300 delegates from every single one of the London boroughs, who were unanimously agreed on three matters. The first was that, this week, far from a celebration, there will be deep anger at the size of the increase in the state pension. This week, as pensioners go into post offices to collect their pension and discover a 75p increase in it, they will be angry.
Secondly, they were all angry because they realised that, from this month, across the country, many local authorities will be increasing council tax and charges for day centre use, home helps and home carers, meals on wheels, adult education and many other services. Those increased charges will wipe out the 75p increase many times over. Therefore, even with the increase, many pensioners will be worse off.
Thirdly, the delegates were angry that—as many hon. Members have said today—many older pensioners are significantly worse off than other pensioners.
The Minister will recall that, earlier in this Parliament, he gave various detailed parliamentary answers to the hon. Member for Northavon (Mr. Webb) which outlined the poverty levels among older pensioners, particularly older women pensioners—who have not had the opportunity to build up occupational pensions; who, in many cases, were too old to become involved in the state earnings-related pension scheme; and who are desperately poor. Age additions are insufficient to meet those pensioners' needs.

Although the free television licence and winter heating allowance are welcome, they are simply insufficient. The poverty in which older pensioners have to live is absolutely disgraceful. Women tend to live longer than men, and they tend to be poorer, colder and hungrier for it. It is simply immoral in our society to ignore the plight of many older pensioners.
Older pensioners, unfortunately, are not the ones who are able to go along to pensioner forum meetings and demonstrations. I do not denigrate those who attend those events, but simply recognise that problems of age, infirmity and mobility make it impossible for many older pensioners to come along to express their point of view.
It is good that the House is debating this issue this week. Nevertheless, we should also recall the history of the issue. First, I pay tribute to the speech made by my right hon. Friend the Member for Chesterfield (Mr. Benn). I also wish him a very happy birthday; I hope that there are dozens more of them. I regret only that he will not have dozens more birthdays as a Member of Parliament. However, I am sure that his voice will be heard from outside the House, and that it will be like a breath of fresh air coming through an open widow.
In 1980, the then incoming Conservative Government destroyed what had been achieved by the 1974 to 1979 Labour Government—who had taken the bold step of saying that, henceforth, pensioners should be able to share in the growing wealth of the rest of the community by linking pensions to earnings or prices, whichever was the higher rising in a given year. Those are precisely the terms of new clause 36, which was so ably spoken to by my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell). The Conservative Government's breach of the link has caused the state pension to decrease from 23 per cent.-plus of average earnings to about 14 per cent. of average earnings. It is continuing to decrease.
Unless something is done to arrest that decline, the state pension will simply disappear as something that is worth claiming. Something similar happened with the dog licence. Although I am not particularly bothered about the dog licence, after a while, people stopped paying for it because it was so cheap. In 50 years, unless something is done to arrest the decline of the state pension, it, too, will be an insignificant detail.

Mr. John Cryer: Like my hon. Friend, I shall be supporting new clause 36 in the Lobby. Is he aware that, if the state pension had been linked purely to prices since 1948, it would now be worth only £27 a week?

Mr. Corbyn: My hon. Friend is absolutely correct. At current trends, in 2050, the state pension will be worth a similarly insignificant sum. We have to make the case to arrest the decline.
I was first elected to the House in 1983, and I happily fought that general election on a pledge to restore the state pension's link with earnings. I fought the next general election on a pledge that we would increase the state pension by £5 and £8. In the subsequent election, we made a broadly similar pledge. In the following election, we said that we would increase the state pension at least in line with prices. We are only now increasing it exactly in line with prices. As any pensioner could tell us, however, those who buy in small quantities, in corner


shops and in declining high streets pay more than those who can drive their Volvo out of town to a hypermarket, where they buy in large quantities. Pensioners pay more to get less in many cases. We must recognise their outrage and anger.
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Worse was to come under the Conservatives, with the legislation introduced in 1985–86 by the right hon. Member for Sutton Coldfield (Sir N. Fowler), and by the right hon. Member for Huntingdon (Mr. Major), who was then a junior Social Security Minister. They used bogus arguments against the state earnings-related pensions scheme, and misread the Government Actuary's report and used it to devalue SERPS, which was the secondary pension that everyone would be involved with. Over time, SERPS and the link with earnings would have guaranteed the lifting of all pensioners out of poverty. The Conservatives devalued SERPS to create a market for private pensions. I should like to know the final bill for the cruel mis-selling of private pensions during the latter years of the Tory Government.
The incoming Labour Government were faced with serious problems. I pay tribute to the Government for introducing the free television licence and the winter heating allowance and for their recognition of the plight of the poorest pensioners. However, I have a serious question for the Minister. Some 1.5 million pensioners are entitled to income support, but do not claim it. There are various complex reasons for that, including pride, lack of information, lack of support or simply being unaware of their entitlement. Is there any certainty that the Government's proposed campaign will result in a significantly higher take-up of the minimum income guarantee? Are we going to spend a great deal money on a publicity campaign to promote the take-up of the minimum income guarantee, which will itself be expensive to administer? As I said in an intervention on my hon. Friend the Member for Hayes and Harlington, the state pension costs 1.5 per cent. of its value to administer. The normal administration cost for a means-tested benefit is between 20 and 25 per cent. of its value, but the figure for the social fund moves up to the dizzy heights of 46 per cent. That means that we spend half the social fund telling people that they cannot have any of it. That does not seem a terribly sensible way of doing things.

Mr. Rooker: We spend £100 billion on benefits. The Department has a running cost of £3.5 billion. I know that the figures are different for different benefits, but the figures for 1997–98 show that the administration costs of income support were 6 per cent. of benefit expenditure. The figure for retirement pensions is 0.9 per cent. A means-tested benefit will inevitably cost more because of the calculations involved, but the figure is nothing like the 20 per cent. that my hon. Friend is quoting.

Mr. Corbyn: I thank the Minister for that intervention. He has confirmed my argument that it costs six times as much to administer a means-tested benefit as it does to administer a direct benefit. I should be interested to see the figures for the administration costs of the minimum income guarantee when it gets going. Would it not be better if that money went into the pockets of pensioners? I shall move on, because I do not want to take up too much time.
The cost of administration is a serious issue, but the underlying principle is also important. The proposal will cost a lot of money without helping many of the poorest pensioners. It will also increase the market for private pensions. I belong to the school in the Labour party that believes that the welfare state should be universal. We should provide for all and we should tax for all on a fair basis. I have no problem with the state pension going to every retired person, because if pensioners have a great deal of other income, it will be recouped through taxation.
However, many pensioners feel keenly the problems of poverty traps. With a small occupational pension, they can lose out on housing benefit and other passported benefits. We have to address that issue. We should aim to eliminate pensioner poverty. As the state pension is the building block of the pensions system, it must rise in line with earnings. If rising in line with earnings is good enough for the minimum income guarantee, the same rule should apply to the state pension.
Let us put the issue the other way round. If the political will was not there in 1980 to maintain the link with earnings and it is apparently not here in 2000, who is to say that some future Chancellor in five or 10 years, when life is not so easy and there is not so much money about, will not decide to break the minimum income guarantee link with earnings? That would leave pensioners with a declining income once again. The Minister should think seriously about the anger of pensioners across the country. Younger people who think that pensioners deserve to be treated better are also demanding the relinking with earnings.
I should also like the Minister to explain the issue at the heart of the debate. He mentioned the growth in the number of pensioner households that is expected over the next 40 or 50 years. That is clearly an issue that we can, must, should and will face. If there are more pensioners, providing for them will cost more. That is the price of a civilised society. We should pay for people to live in decency in retirement. I am alarmed to read the proposal in the Government's Green Paper on pensions to reduce from 60 to 40 per cent. the proportion of the cost that the Government pay in support for pensioners. That is a pointer towards the idea that people should make their own private pension provision during their working life. Private pensions cost more to administer, are less secure and generally provide less at the end than the security of a state communal system. That is where the socialist and social democratic parties of Europe came in, demanding a welfare state that was inclusive of all.
I do not expect that we shall be successful in the vote tonight, but I hope that those in government who are arguing for a relink with earnings and who recognise the justice of the pensioners' case that they are hearing on the doorstep and in the high streets will at least have more power to their elbow to argue for justice for the elderly of this country.
During the previous three Parliaments, I introduced private Members' Bills to try to give effect to that principle. I have not done so during this Parliament, because I believed that we would achieve justice for pensioners. I am sorry to tell the Minister that 1 am not happy with the Government's policies on this. We should restore the link with earnings and, over time, revalue the pension to its original level. That would be justice for the pensioners of this country.
It is said that a civilisation can be judged on how well it treats its elderly. We are not doing enough for our elderly and the very elderly are doing very badly. It is time that we addressed that issue.

Mr. Webb: I shall make a brief contribution, reflecting on some of what has been said so far. I thank the hon. Members for Birmingham, Selly Oak (Dr. Jones) and for Islington, North (Mr. Corbyn) and the right hon. Member for Birkenhead (Mr. Field) for their support for the principle of higher pensions for older pensioners. The right hon. Member for Birkenhead has been such a powerful advocate of the cause that I find myself receiving letters from pensioners asking why I do not follow his lead on that.
I should like to comment on the Conservative approach to the new clauses. The contribution of the hon. Member for Tewkesbury (Mr. Robertson) was thoughtful as far as it went. He said that he was concerned about today's pensioners, but did not support a means-tested response, a universal response or a targeted response by age. It was not clear where that rejection of all three options—the two advocated in the new clauses and the third in the minimum income guarantee—left the Conservatives. I am not sure whether we are going to hear from those on the Conservative Front Bench.

Mr. Pickles: We are.

Mr. Webb: That is reassuring. The hon. Member for Havant (Mr. Willetts) has said that the Conservatives would simply have put 75p on the state pension and that any further response would have to wait for a manifesto. We have reached a sad state when the supposed principal Opposition party has no policy on the basic state pension.
The Government has accepted the principle of a higher pension for the over-75s by introducing the free television licence for those pensioners only. When the Chancellor announced that in the Budget, he said that he had been asked to put money on the pension but was going to use television licences, presumably because of the political attractiveness of the issue rather than any reason of substance.
When asked why the extra money was not put on the basic state pension, Treasury Ministers say that it is because the benefit is taxable. As we have heard, many of us support taxable universal benefits, with the better-off paying something back, freeing up extra money for the basic pension, so the fact that the benefit is taxable is no defence at all.
The other defence is that the money would not go to the poorest pensioners, but, as the hon. Member for Selly Oak said, the poorest pensioners are those who do not take up their entitlements. The proposals in the new clauses are well targeted and would benefit the poorest pensioners, so I do not know why the Government do not support them.
Two new clauses are on offer. New clause 8 is our party policy. New clause 36, on the earnings link, is not but we will support it because we now have a Government who do not believe in the basic state pension. They had hundreds of millions of pounds to give to pensioners, and the money has gone on the means test, the capital limits, the television licence, the prescriptions, the winter fuel

payments—everything but the basic state pension. We support the idea that the basic state pension should have not a funeral march but a future. Our preferred mechanism is new clause 8, but if that does not succeed we will support new clause 36 as a statement of our continuing belief in the basic state pension.

Mrs. Alice Mahon: I support new clause 36. I welcome the help given to pensioners in the Budget. I am a practical person, and I have the figures. In Halifax, 18,000 pensioners were helped by the increase in the winter fuel allowance and by the free eye tests. Those measures are worth £3 a week to a household, so they should not be ignored. Because people seem to live a long time in West Yorkshire, I also welcome the free television licences from which thousands in my constituency will benefit, but I give notice that I would like the qualifying age to come down to 65 in the next Budget.
I also welcome the abolition of VAT on fuel, the help with transport and the increase in the savings threshold. Furthermore, I am aware that the allocation of £8 million to Calderdale and Kirklees health authority will help pensioners more than any other group—and quite rightly, as they introduced the national health service and fully deserve that help.
However, I am firmly convinced, and always have been, of the arguments for restoring the earnings link. That is why I shall vote for new clause 36. What is more, I believe that I speak for the majority of pensioners, especially in Halifax, when I say that they need a substantial rise in the basic pension now, and the restoration of the earnings link as soon as possible.
I listen to pensioners. Before tonight's debate, I looked through all the submissions to the Green Paper "A new contract for welfare: partnership in pensions". One response was a booklet, "The Unwanted Generation", published by the National Pensioners Convention. In the foreword, Jack Jones, who has been a stalwart fighter for pensioners, says:
We published our written submissions (Pensions, not Poor Relief) in March 1998. They amounted to a comprehensive and sustainable programme of reform, taking account of the needs of both today's and tomorrow's pensioners. We stressed the need to make good the loss of the value of the basic pension resulting from the breaking of the link with average earnings, and to restore the link for the future.
I could have brought along a dozen publications giving such advice in response to the Green Paper, and I really wish that the Government had taken that advice.
I have listened to Ministers' arguments about targeting and affordability, and I simply disagree with them. Elderly people think that they have a right to a non-means-tested pension. The arguments about the stigma and shame that some elderly people feel when they have to fill in forms and claim what they see as handouts have been well put. I really hope that the publicity that we are about to mount to ensure that the 1.5 million poorest pensioners take up their entitlements is successful, but I suspect that many of them will still slip through the net.
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If we are genuinely committed to helping pensioners—the Budget proves to some extent that we are—and want to convince a quarter of the people in our society that we will give them the security in old age that they deserve, we must restore the link with average earnings.
I have listened for years to the argument that wealthy pensioners will benefit if we restore the link. So what? They have contributed, too. I want to keep them in the system, contributing to the NHS and to everything else that makes society worth while. We have a tax system and we could use it, paying out at one end and taking at the other. There is nothing wrong with redistribution. I was brought up on it in my many, many years in the Labour party.
I give the last word to Baroness Castle and Professor Peter Townsend, two eminent fighters for social justice if ever there were two. In line with what everyone else with a real interest in pensioners said in response to the Green Paper, their excellent pamphlet, "We CAN afford the Welfare State"—I believe that, as one of the richest countries in the world, we can—said:
We must resurrect the basic pension as the foundation of security in old age for everyone. This means the restoration of the earnings link for future annual upratings.
I believe that, and I hope that many hon. Members will join us in the Lobby tonight.

Dr. Norman A. Godman: I support new clause 36. It was, however, right and proper that my right hon. Friend the Member for Birkenhead (Mr. Field) and others paid tribute to the Government's achievements. I sincerely believe that my right hon. Friend the Prime Minister and the Government are genuinely committed to creating a more tolerable society, as reflected in matters as diverse as constitutional reform, the peace process in Northern Ireland and tackling racism and other evils that bedevil our society.
That more tolerable society is a wholly admirable objective, but our society is intolerable because of the demeaning position and the humiliation that our elderly people suffer. In the past few days, several of my elderly constituents have said that they warmly welcome the increase in the winter fuel allowance and the concession on television licences. Down the years, I have supported those measures, admirably campaigned for by my hon. Friends the Members for Walsall, North (Mr. Winnick) and for Islington, North (Mr. Corbyn) and others who have worked to make life more tolerable for our elderly citizens.
We have to do more, and one of our objectives, as a party in government, with the history to which my right hon. Friend the Member for Chesterfield (Mr. Benn) referred, is to ensure that life becomes more tolerable for our elderly people. The other day, an old fellow, when talking about his bitter disappointment with the Government, reminded me—I confess that I needed reminding—that it was Charles de Gaulle who said that old age is a shipwreck. He told me that what makes old age so hazardous for him and for many of his neighbours is the rottenness of the treatment that they suffered under Tory Governments and the present Government's failure to do more for them, so I make that plea to the Government: they must seriously address the plight of elderly people.
I guess that I am not alone in having an elderly forum in my constituency; I think that just about every constituency in the UK now has such a forum. My local one is led by a formidable female by the name of Mrs. Nell McFadden. As people say in the west of Scotland, if she is angry with someone, she does not miss

them and hit the wall. At some heated meetings that I have attended in recent times, she and her colleagues have said to me that they are bitterly disappointed although they greatly appreciate what has been done by the Government, which is in dramatic contrast with how they were treated by the odd job lot opposite when they were in power for so long.
I tell my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell) that, in Scotland, disaffected elderly constituents do have a choice. Very few of them vote Conservative, rightly, but they can choose to vote for the infant Scottish Socialist party or the Scottish National party, both of which play to the gallery on the issue. [Interruption.] I remember Ayr well, and so should the Conservative party because it was the first election that it had won in many years. There are no Conservative Members representing Scotland in this place. I suspect that that will last for some years, but that is another story.
If we are to honour our obligations to elderly citizens, we must lift them out of poverty. Up to now, we have failed them because we have not done that. With regret, I shall vote against the Government. I will vote for new clause 36 because it has long been my aim to restore the link, which was cruelly taken away from elderly people by the Conservatives when they were in power.
Many of the people whom I represent are in their 70s, 80s or 90s. Because of the occupation that they followed—many experienced long periods of unemployment—they never had the opportunity to save money for their elderly and declining years. We must restore dignity and respect to their lives.
The Government are doing that with some of their measures. In that regard, their achievements are admirable, but more must be done. If it means taxing those with the money, so be it. I have always argued for a progressive tax system. If we must have such a system to make life better for elderly people, that is what we should have. They deserve better from us and, at the moment, we are failing them.

Ms Abbott: I support new clause 36. I pay tribute to my hon. Friend the Member for Islington, North (Mr. Corbyn). For many more years than he cares to remember, he has been an advocate for the elderly and taken up this issue, in season and out of season, on the Floor of the House.
As many Members have said, if there is one group of people that feels let down by the Government, it is pensioners because, for 20 long years, we promised them the restoration of the link with earnings. Many of us are speaking to the two new clauses, but I am surprised that many more are not doing so because each and every Labour Member must hear what I hear from pensioners in my constituency about their disappointment in respect of the failure to restore the link. I suspect, perhaps unfairly, that those Labour Members who troop through the Lobby against the new clause will not publicise the fact in their constituencies.
If I were not aware of the real feeling among pensioners about the issue, members of my local Hackney pensioners forum would have ensured that I was. I pay tribute to Hackney pensioners, who are some of the most vigorous and forthright in the land, although some Members might contest that claim.
Pensioners are not easily fooled. They cannot be deluded with spin, announcements and re-announcements. They know that they were promised one thing for many years while we were in opposition and that, now we are in government, suddenly those promises are out of the window. They have observed that. All the spin in the world and all the articles drafted by Alastair Campbell will not distract pensioners' attention from that.
Ministers have said, and will say again tonight, that many pensioners are better off. That is true. Those with occupational pensions and so on are better off, but, like my hon. Friend the Member for Greenock and Inverclyde (Dr. Godman), most of the pensioners whom I represent did not have jobs which made it possible for them to have a big occupational pension and other benefits. The pensioners whom I see are among the poorest.
In 2000, poor pensioners are seeing their income shrink alongside the erosion of social service provision, which pensioners in particular rely on. It is bad enough that the value of the pension is being eroded, but if, as is certainly happening in my part of London, pensioners are seeing cuts in the home help service, charges for that service, cuts in day-care services and cuts in adult education, that makes the decline in the state pension ever more acute. The safety net of social security provision, which they have come to rely on, is being eroded by overall cuts in public expenditure, not to mention—I hope to address the House on the matter on another occasion—the chaos in housing benefit in many local authorities throughout the country, which is hurting the elderly in particular.
Members have spelled out the case against means-testing. It is a disincentive to save. It is six times more expensive to administer means-tested benefits, as the Minister has admitted, than to pay a universal pension.
The thing that weighs with me most about means-tested benefits and pensioners is that more than any other single group in the land—more than the disabled or lone mothers—it is pensioners who feel the stigma of such benefits. If there is one group that should be excluded from having to claim means-tested benefits, it is pensioners.
As I know from personal experience in my family, many pensioners, through sheer pride alone, will not claim means-tested benefits. Ministers talk about the minimum income guarantee and urge reliance by pensioners on means-tested benefits. They know that, however effective the take-up campaign, a considerable number of pensioners will not claim because of the stigma and the association.

Kali Mountford: Can my hon. Friend explain why people do not feel the same stigma when applying for housing benefit and council tax benefit?

Ms Abbott: My hon. Friend has not been here for the entire debate, but let me explain. When she has been a Member of Parliament for a considerable time—[Interruption.] When she has done that, she will know that pensioners believe that they are entitled to a pension as of right. What pensioners want is a basic income as of right. They do not want to ask for what they perceive as handouts in the form of means-tested benefits. If she does not believe me, I suggest that she discusses that with

pensioners in her constituency. Furthermore, the ultimate problem for pensioners who do not claim housing benefit is that they will be evicted, but—I am surprised that she makes that point—I cannot overstate the extent to which pensioners believe that they are entitled to a basic income as of right and should not have to claim for means-tested benefits.

Kali Mountford: Will my hon. Friend give way on that point?

Ms Abbott: No, I have to make some progress. I am sorry that my hon. Friend is not aware of the strength of feeling among pensioners. If she has any doubt about pensioners' fear of the stigma attached to claiming means-tested benefits, she should come to the next meeting of the Hackney pensioners forum. That will remove her confusion.
As has been said, pensioners appreciate the free television licences being granted to those over 75, and the fuel provision. However, they want the long-promised rise in the basic pension to be implemented and the link restored.
Members of the Labour party across the country also want that link restored. By any test of opinion—a postal ballot, say, or an electoral college—that is what most party members want. I served for a few years on the party's national executive committee. I well remember the 1996 party conference, at which a composite resolution, heavily supported by the constituencies and trade unions, called for the restoration of the link.
Behind the scenes, there was a momentous battle to prevent that resolution from going to a vote. The hapless delegate who was to move the resolution was told by the then shadow Chancellor that, if he went ahead and moved it, he would be responsible for losing Labour the next general election. The same shadow Chancellor telephoned that delegate's constituency party chairman with the same message.
Delegates buckled under the incredible pressure exerted by officials and the shadow Cabinet. The composite was moved by Baroness Castle, in a brilliant speech—

Mr. Deputy Speaker: Order. I am well aware of the background activities at that Labour party conference. However, the hon. Lady has made her point, and should keep to the amendment.

Ms Abbott: I am grateful to you, Mr. Deputy Speaker, for acting as a witness to internal Labour party matters, but I will not dwell on those sadnesses.
However, my point is that Labour party members—from the left, right and centre of the party—feel just as disappointed as pensioners. Even at this late stage, Ministers should consider their position on the matter.
The Government are willing to give out money for fuel relief and free television licences, so why will they not do anything about the basic pension? There may be several reasons. Labour Members and pensioners forums around the country may not have put their case compellingly enough. Perhaps the Government want to keep overall public expenditure within the limits set by the Maastricht treaty—but I will not delay the House with such speculation.
For 10 long years as a Member of Parliament, I have attended meetings of the Hackney pensioners forum. I would tell them of the party's commitment on the matter, and the pensioners would talk about what would happen when the Labour party got into power. The Labour party is in power now, and 20 years of commitment to restoring the link has gone out of the window. Many pensioners will be left in poverty, despite the take-up campaign for the minimum income guarantee. The sadness is that, after waiting so long for a Labour Government, pensioners are being failed by that Government. What hope have they now?
I urge Ministers to re-examine this matter, which is at the heart of the concerns felt by many Labour party members across the country.

Mr. John Austin: Some of the relevant figures may explain why there is so much anger among pensioners. The basic pension is £67.50 a week, or £107.90 for a couple. If the previous Conservative Government had not broken the link, those amounts would have been £97.45 and £155.80—£30 and almost £50 a week higher, respectively.
How can people live on the basic pension? Many do not live on it, but merely survive. Sadly, some do not even do that, as the figures for hypothermia show.
I accept everything said by my hon. Friends the Members for Hayes and Harlington (Mr. McDonnell) and for Islington, North (Mr. Corbyn) about all the material benefits that the Government have given to pensioners. There is no doubt that pensioners are immeasurably better off than they would have been under Conservative spending plans and policies. We must remind ourselves that when the Leader of the Opposition talks about reducing taxation, he does so in the context of reducing spending on welfare. We know from the record of Conservative Governments in the past that tax cuts come from breaking the link between pensions and earnings.
We must bear in mind the feelings of pensioners, despite the benefits that have come from the Labour Government. As my hon. Friend the Member for Bolton, South-East (Dr. Iddon) said to me, the increase for a single pensioner on the basic pension this year was less than the price of half a pint of beer. As my hon. Friend the Member for Islington, North pointed out so clearly, the rate of inflation for pensioners is much higher than for other members of the community, as they cannot make savings through cheap shopping, bulk buying, and so on.
The Government may argue that the cost of restoring pensions to what would have obtained had the link not been broken is too high and cannot be afforded. However, raising the pension level to that of the minimum income guarantee would cost about half as much, and I urge the Government to take that option.
I have talked to Ministers, including my right hon. Friend the Prime Minister, about this matter. I have been told about the cost, and that money put on the basic pension would not reach those most in need. However, the fuel allowance represents an inconsistency on the Government's part. It is universal and goes to everyone but, unlike pensions, it is not taxable. That benefit therefore goes to everyone, irrespective of income, and the Government cannot claw it back from the better off.
My hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) spoke about means testing. She pointed out the problems associated with it: she said that it was a

disincentive to saving, and that, wherever the threshold or limit was set, some pensioners would be placed in a poverty trap.
From our surgeries, all hon. Members will be familiar with people whose few pounds a week from occupational pensions remove them from eligibility for means-tested benefits. The Minister intervened earlier and admitted that it cost six times as much to administer means-tested benefits as it did to administer universal benefits.

Mr. Rooker: I intervened to give the facts. It is six times more expensive to administer means-tested benefits, but not 25 times more expensive, as had been claimed.

Mr. Austin: I am using the figure that the Minister gave—that it cost six times as much to administer means-tested benefits. However, that does not include the cost of a take-up campaign. Half my constituency is in the borough of Greenwich, which has one of the best welfare rights units in the country. The Conservatives have criticised the council for spending council tax money on a job that should have been done by the Department of Social Security.
I think the job is better done by people outside the Benefits Agency, and the take-up campaigns have put hundreds of thousands of pounds into the pockets of the poorest people in the borough. However—perhaps because of the associated stigma, or for some other reason—hundreds of thousands of people do not claim their entitlement. A million people who are entitled to the minimum income guarantee are probably not claiming it.
If we continue to uprate the basic pension in line with inflation, it will be worth half its current value by 2040. The argument for linking pensions with earnings is so that elderly people can share in the increased wealth of the country. Those who argue for a link with prices say that at least that maintains the purchasing power of pensioners. Hon. Members have shown that it does not.
I wonder how many hon. Members read the report this morning about the rising cost of funerals. Someone from the National Association of Funeral Directors said that funerals may have increased above the rate of inflation, but they have fallen in relation to average earnings. So not only do pensioners suffer in life: they are penalised in death.

Mr. Frank Cook: I have just returned today from a week in which I was leading a delegation from the NATO parliamentary assembly which was looking into nuclear matters in the Czech Republic. We also visited the comprehensive test ban treaty preparatory commission and the International Atomic Energy Agency, both in Vienna. What has that to do with the debate? It is this—I was told this evening that a debate had taken place on this topic in the parliamentary Labour party meeting on Wednesday, that it had been a good debate and that everyone was satisfied. I was asked why I was going to vote against the Government, because as soon as I knew that this was to be debated on the Floor of the House, I sent a note saying that I have always promoted the concept of a link between earnings and pensions, so I would support new clause 36. I was told, "We have already had the debate." I said that I had not been there. When asked where I had been, I explained. I was told, "We did not know you were absent."


What does that say about how much I count for in the House? I am noticed only if I threaten to vote against the Government. I offer this explanation for people who have not been here as long as I have.
I confess that I have a vested interest in the debate. I am 65 this year, and I do not know what will happen to me. The outcome of the debate may matter to me next year. However, that is a facetious remark.

Mr. Michael Jabez Foster: The hon. Gentleman is an extremely good example of a person with a substantial pension to come as well as his retirement pension from the state. He has no need for an increase above inflation in any event, because he is one of those with a second pension.

Mr. Cook: I remind my honourable colleague—I am not sure whether he is a Friend yet—that, come the day, I shall enjoy paying my income tax. That is a distinction that many people miss. We are talking about people whose income is so paltry that they will be unable to pay income tax on their benefits.
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I have the greatest respect, in a fraternal sense, for some of my colleagues. I watched the performance of my hon. Friend the Member for Colne Valley (Kali Mountford) in Committee, and I admire her ability. Yet from a sedentary position, she said that she had spent 25 years in public service. I am sure that she spent 25 very praiseworthy years in the service. If that is the case, she should remember a time when pensioners were provided for better than they are today, or will be tomorrow.

Kali Mountford: Not according to the report.

Mr. Cook: If my hon. Friend has the good fortune to catch your eye, Mr. Deputy Speaker, I am sure she will be able to make her case.
Another colleague for whom I have great respect and admiration said that the Tories are loving this. They might well be—

Mr. Field: If they were here.

Mr. Cook: Yes. It would be one of the few times the Tories have enjoyed something that is true. The truth is coming out of the debate tonight. The people who do not enjoy differences among Labour Members will be the pensioners—the people to whom we have given these promises year after year, election after election. I have been an associate member of the Teesside pensioners' association since 1971. I qualify for full compliance next year, and I will be proud to do so.
I appeal to Ministers to listen to the arguments—arguments that they themselves have made repeatedly in the past. I appeal to colleagues who perhaps have more of an eye on career development than on the retention of

principle—[Interruption.] I invite my colleagues who think that that is a dirty remark to stand up and be dirty in return.

Mr. Deputy Speaker: Order. I have listened to the debate throughout. As we do not want to lower its tone, perhaps the hon. Gentleman should not use such language.

Mr. Cook: I accept your reprimand, Mr. Deputy Speaker. If I withdraw that comment—which I do unreservedly—I am at a loss to establish the motive for the stance that has been adopted or espoused by some of my hon. Friends.
I appeal to Ministers to listen to the arguments. I appeal to those who support the Government on this matter to listen to the arguments. I hope that we will have the opportunity to change course, even at this late stage.

Kali Mountford: I had not intended to speak in the debate. I sat through the debate all day last Wednesday, I have been sitting here expectantly from 3.30 this afternoon listening to the debate on a range of issues relating to the Bill, and I served in Committee. However, I rise to speak because I feel that I have been patronised more thoroughly today than I have been in a long time.
I have worked in public service since I was 20 and have been, for a substantial amount of that time, involved in the voluntary sector. I have come across many people in many circumstances, particularly those who felt stigmatised when income support was related not just to pensions but to all parts of the benefits system.
Having thoroughly supported the Minister of State when he supported a link with earnings, I do so no longer, and for very good reason. State benefits, and pensions in particular, have changed since then. If I felt that a continued policy of a retained link with earnings gave a particular benefit to all pensioners, I would support it. I even went so far as to write to the Chancellor when the link with prices showed that the sum would be derisory.
I was concerned about that, but to be frank, it was because it looked bad, not because it was bad in principle or because I felt that there were people who were more deserving. I mean, 70p just does not sound good. Hand on heart—it was not because I thought that that was the right thing to do.
When I listened to the Budget statement, things changed radically for me, and I looked more closely at our own reports, what we were really saying and what we were trying to achieve.

Mr. Stephen Pound: I appreciate that it may not look good, but is my hon. Friend aware that, over the past 15 years, the annual monetary increase in pensions has swung from 40p one year to £5.17 another year? We cannot make an argument about whether it looks good. It is linked with inflation—that is the reason for those figures.

Kali Mountford: Obviously, if it is linked with inflation, that is the reason for the figures. However, we must look at the total amount of pensioner income. I do not believe that re-linking pensions with earnings would necessarily benefit all pensioners in all circumstances.
The new clause would create a catch-all safety valve enabling us to offer the biggest pension increase possible at any time. I am not sure that that would be the wisest


use of public money. Why give large one-off increases to pensioners? The increase of £100 to £150, for example, seems huge. Why provide that rather than increasing the amount of money that we can give pensioners in line with earnings? The answer is simple, and it has nothing to do with taxation. Doing that helps pensioners who need it most, and it does so most swiftly, most effectively and most efficiently. It deals with the poverty gap.
I advise my hon. Friends to read page 25 of "The Changing Welfare State", volume 2, which shows the growing gap between the poorest and richest pensioners since 1979. Clearly, there has been a vast change in pensioner incomes. If we wish to affect the lives of those about whom I care most—the poorest pensioners—there are several things that we must do.

Dr. Lynne Jones: My hon. Friend points to the growing gap. Has not that gap grown while the basic state pension has been linked to prices, not earnings?

Kali Mountford: If my hon. Friend reads the report closely, she will find that there has been a huge increase in occupational and private pensions, which have changed what we should do for pensioners. We must target resources on people who have never had access to occupational or private pensions, which is why I support the second state pension, which will give money to carers, people with disabilities and those on low incomes who have not had access to second pensions. The minimum income guarantee, which includes the safeguard of a link with earnings, will lift people in poverty out of it. We must do something to close the poverty gap.
I have heard nothing in the debate that would help to close the gap. We want to lift people out of poverty and make a real difference to their lives, and the Government's pensions policies do that. I have heard nothing to make me think that a return to a link with earnings would make an instant difference to people's lives.

Mr. Field: My hon. Friend says that she has heard nothing said that would lessen the gap between richer and poorer pensioners. In fact, we are having two debates, and one of them is about ensuring a much more substantial state retirement pension for the oldest pensioners. Does anything in the volume to which she has referred disprove the point that one of the most effective moves we could make to combat poverty among the oldest pensioners would be an increase of, say, £15 in the state pension for people aged over 80?

Kali Mountford: Obviously, a sudden huge increase would put money in people's pockets. How could I dispute that? We all know that the oldest pensioners receive the least and are the most likely to be in poverty. That is why I support the £150, which, rather than going through hoops, goes straight into people's pockets without a means test, and which is not discounted against means-tested benefits. I support it as a quick, efficient and effective means of getting money to people.
We have taken great strides towards helping those in the greatest need, including policies such as free television licences for those aged over 75. Some people in my constituency have said that that is patronising, but several have stopped me in the street to say that they are pleased with what I am doing and that it has changed their lives—

and that does not happen often. An elderly constituent told me that she had received a £100 cheque in the same week as a £130 fuel bill. That makes a significant difference to people's lives; and that elderly person told me that she will be 75 this year, so she will receive a free television licence. She did not feel patronised; she felt a real difference to her life.

Mr. Winnick: Is my hon. Friend aware that I have received not a single complaint about pensioners feeling patronised about the television licence or winter heating payments? The opposite is the case. Time and again, pensioners asked why Conservative Governments refused to help, and they feel no more patronised about television licences and winter fuel than they do about bus passes. Indeed, they would be deeply offended if the bus pass were taken away.

Kali Mountford: My hon. Friend is right. Nor do pensioners feel patronised when they make claims for housing or council tax benefit. We must tackle the stigmatisation of particular benefits, and not just for pensioners. Across the board, people feel stigmatised if they think that benefits are not theirs of right. The Government must tell people that they have worked all their lives—in the home, as carers for elderly parents or someone who was disabled, on low pay, as part-time earners or as a disabled person who was unable to work—and that we all value them. We must tell them that extra income will go into their pockets not as a stigmatised, means-tested benefit but because it is theirs of right. The minimum income guarantee is theirs of right, and we should launch a take-up campaign beyond anything ever done before.

Mr. Kelvin Hopkins: I am sorry to say that I cannot follow all my hon. Friend's arguments very well. Does she agree that even if pensioners claimed all their means-tested income support and did not feel that there was a stigma, that would not alter the fact that means testing is not right? We want a higher, non-means-tested state pension.

Kali Mountford: I do not hold the same view as my hon. Friend. In all my time dealing with benefits, it troubled me that people stigmatised that sort of benefit. By doing so, we make it difficult to get benefits to people even when it is their right to have them. We should make it clear that people have a right to the benefits that the country has decided belong to them. As long as we talk in the way my hon. Friend does, we shall demean what we seek to do as a state and a Government.
It is right to put money in people's pockets. I am very disturbed by some of what I have heard today. I do not think it right to demean people. We should put money into the pockets of those who need it, and that is what we are doing.

Mrs. Lait: I shall not speak for long because I do not want to intrude on family grief. I have been interested to see that we face two parties—one below the Gangway and one above it, although even that distinction is beginning to splinter. I hope that the hon. Member for Colne Valley (Kali Mountford) will not think me patronising if I say that she made a brave speech. That was a difficult thing to do in face of the emotional appeals made on behalf of elderly pensioners.
I hope that the right hon. Member for Chesterfield (Mr. Benn) will accept congratulations from everyone in the Opposition on his birthday—[HON. MEMBERS: "Everyone?"] I am sure that everyone would wish a happy birthday to such a pillar of the House of Commons. The right hon. Gentleman, as so often, put his finger on a good point. He mentioned the compact between the generations on which the whole national insurance system is built. The compact implies that those who pay should be prepared to do so. One reason for the break in 1980 between earnings and prices was a fear felt by the Conservative Government that the pay-as-you-go system would put an intolerable weight on the current generation. It was feared that the compact that produced national insurance benefits would be broken in the long run. We need only consider the structure of the population to realise that generations behind us—it will not be long before I can claim my pension, although I am not planning to retire—will ask whether it can afford me. That is the real problem.

Mr. Ronnie Campbell: Cheap.

Mrs. Lait: They probably do feel that they cannot afford me, because I am not cheap. However, I would just point out that I am just one of very many people.

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Dr. Lynne Jones: Surely the existence of a basic state pension to which everyone contributes reinforces solidarity between the generations rather than the reverse. People have to make provision, whether by pay-as-you-go into a state system or by paying into a private system.

Mrs. Lait: The hon. Lady has rather missed the point, which is that if there is no money left in someone's pocket to pay for private provision, they will resent paying too much for the older generation. That is the point that needs to be addressed.

Mr. Tony Benn: Pensioners have been productive during their lives. If the hon. Lady really wants an example of a completely non-productive unit, she should visit a hospital where babies are delivered. Not a single baby has ever produced a profit for anybody. A visit to such a hospital exposes the outrageousness of the argument that we cannot afford to look after old people. I visited the hospital in Chesterfield; I was shown round by an accountant. When we came to the premature baby unit, she said, "This is the most expensive part of the business." If premature babies are uneconomic units, why should we pay for them? The hon. Lady has misunderstood the whole purpose of the welfare state.

Mrs. Lait: I think the point is that the premature baby who, luckily, because of the national health service, can survive, is the future payer of our pensions. That is the crucial thing, and that is why we need to ensure that all those pensioners who can are able to pick up all the benefits that are available. That is why the Conservative Government ran campaigns to encourage people to take up all the benefits; and we wish the Government well with their campaign on the minimum income guarantee.
I hope that the Government can crack the stigma and turn the issue into a matter of rights. As the hon. Member for Colne Valley said—and I am sure that my hon. Friends do not disagree—it is people's right; they have paid in, and they should accept their benefits without feeling any stigma. I sincerely hope that the Government's campaign works.
I understand that the Government believe that about 600,000 people are eligible for the minimum income guarantee, not 1.5 million—doubtless the Minister will make that clear. In any case, we need to ensure that those people who need more benefits get them.
We should also bear in mind the fact that one of the reasons why so many pensioners are so angry at the 75p increase is that they have been on the receiving end of the hidden stealth taxes that the Government and the Lib-Lab pacts that run so many local councils are piling on to council tax and all the other services that people receive through local authorities. Pensioners would not feel nearly so aggrieved if those stealth taxes had not been dumped on local authorities to enable the Government to sustain the hope of keeping their promise on income tax so that they do not offend the heartlands or middle England.

Mr. Rooker: I shall do my best to respond to the debate, which I applaud. As I mentioned at Social Security questions today, a couple of weeks ago the Government arranged for a three-hour debate in Westminster Hall on pensions reform, and one Back Bencher turned up, who happened to be a Labour MP. I notice the dearth of any attempt at a debate by Conservative MPs on this important issue.
I am in no way, in anything that I have to say, criticising the fact that new clause 36 has been tabled for debate, because that is what this place is for; the day we forget that, we might as well all pack it in. Nevertheless, I cannot accept all the arguments, even though, as I happily admit, I have made many of them myself in the past—indeed, more than most. [Laughter.] Well, I have. I suspect that I have attended more meetings of pensioners at factory gates and in pensioner groups, in trade unions and at particular companies, and more meetings of the National Pensioners Convention, than most hon. Members, simply because I have been in this place for 26 years.
I argued the toss up and down the country in 1983, 1987 and 1992, on the Labour manifesto of restoring the link, using the figures that my hon. Friend the Member for Islington, North (Mr. Corbyn) mentioned—£5 and £8. At the end of each election I went back to my constituents—I never really left them—and told them, "I am sorry; I did all the speeches but we lost. We have not even got a crumb off the table."
We lost every single election at which we made those commitments. My hon. Friends should start to think about why we lost all those elections. We made absolutely firm, positive commitments: no one was in any doubt about their clarity, because the manifesto promise even included the figures in pounds—£5 and £8. That was absolutely clear and unequivocal. No one could have doubted what we would do, but we did not get the chance to do it. I am not saying that we lost for that reason. We lost because people did not believe, by and large, that we could deliver the overall package that we were proposing: they thought, "Economically, it don't make sense".
At the last general election we made a different, more modest, commitment—more modest in the sense that we made the commitment of using the basic state pension as the building block. We said that it would not be means-tested, that it would rise at least in line with prices—which 1 accept is what has happened in the first three years of this Government—and that pensioners would also share, in ways that were not specified, in the wider economic gains of the country.
I must tell my hon. Friends that this debate really should not be an argument for or against the means tests; it is much narrower than that. However, if my hon. Friends want to have the argument about whether pensioners should or should not be means-tested, they cannot ignore the past. The last Labour Government introduced the link between the pension and earnings or prices—whichever was the higher. I was here, and I was proud of what that Government did. We even raised pensions twice in one year. I might add that the reason why that we did it was that there was no annual pension increase before the Labour Government of 1974. There were some years—four or five since 1948, and always under a Tory Government—in which there was no increase whatever.
We also maintained that link in a period of extremely high inflation. Both prices and earnings inflation were into the teens or the early twenties. The figures were astronomical—no doubt about it. But we introduced that pledge, and we carried it out. I know that it is a nit-picking point to say that, in the four years in which we did so, we got it wrong three times out of four because a system of forecasting was used rather than the historical system that we use now. In April, the Minister used to stand at the Dispatch Box and say, "I think that, in November, earnings will be a certain figure and prices will be a certain figure. This is the higher of the two, so we are fixing the pension"—it had to be fixed 20 weeks in advance. When we reached November, in three years out of four, the figure was not quite right; and in one year, our forecast of which would be the greater of earnings and prices was wrong. We really got it in the neck for being wrong, even though there were often substantial monetary increases—although not real-terms increases.
In 1979, when we got the boot, we had what looked like a good track record, because there had been a real increase in the pension package over those four years. And when we got to 1979, anyone would have thought that we had done so well that we had got the pensioners off the means test.
I regret the fact that there are pensioners on the means test. I wish that we had a policy that would enable us to declare, "We guarantee that, in a year's time, no pensioner will be subject to the means test." As I said at Social Security questions today, even with our current package of so many measures, we cannot say that. We can get the number of means-tested pensioners down to one in five from one in three, but one in five is still a large number of people. Even today, some 28 per cent. of new pensioners go on to the means test. Today, 40 per cent. of all pensioners are on means-tested benefits.

Dr. Lynne Jones: Will my right hon. Friend give way?

Mr. Rooker: No; not at the moment—not until I have made the point that I wanted to make about 1979. In 1979,

when we left office, after those halcyon days of the link, 57 per cent. of pensioners were still on means-tested benefits—millions, more than half of all pensioners. So we have to ask ourselves, what has happened between then and now? The answer, in a nutshell, has been mentioned by my hon. Friend the Member for Colne Valley (Kali Mountford) and it appears on page 25 of the document that we published last week. An enormous difference has grown up between high and low-income pensioners—a massive change between the top 20 per cent. and the bottom 20 per cent. Therefore, fewer pensioners are on the means test than in 1979, but they are poorer by far. There is no doubt about that, and they have no hope of digging themselves out of the position that they are already in.

Dr. Jones: My right hon. Friend said that his aim was to get the proportion of pensioners reliant on the means test down to one in five. Is that not the current figure?

Mr. Rooker: As I have said, if we do nothing, one in three pensioners will end up on the means test. This overall package will get the figure down to one in five, and I regret that the number will not be less than that. However, I have described the effect of all the pension changes that we are making.

Mr. Willetts: When will that be?

Mr. Rooker: In the middle of this century—2047. I have never hidden that fact. I have always said that a pension is a pension. It is not something that one buys off the shelf and that is available today. One has to build it up.
The halcyon days—the link lasted for only four years—left us with 57 per cent. of pensioners on the means test in 1979. There are still many on the means test today, but an enormous gap has grown up. Nobody who seriously wants to attempt to tackle that gap can do so by lifting everyone's income up. That does not make sense in anyone's calculation; there are no good grounds for doing that, either with public money or with private funds. Therefore, it is our moral responsibility to target resources on closing that gap by lifting the incomes of the lowest 20 per cent. up while not holding down those of the top 20 per cent. We must lift the bottom 20 per cent. up at a faster rate than the highest 20 per cent. That is the only way that we can tackle the gap, and we must do that as quickly as we can. One of the measures to deal with the gap is the introduction of the minimum income guarantee.

Mr. Alan Simpson: I am grateful that my right hon. Friend has drawn the House's attention to the graphs on page 25 of the document. We are faced with the burgeoning gap between the richest and the poorest pensioners, so will he explain how free television licences and the winter fuel payments, which are tax exempt, will help to narrow the gap? Raising the state pension would bring more people into tax bands and would enable us to recoup income. That would be a redistributive measure and would be more effective in directing resources towards those on the basic state pension.

Mr. Rooker: My hon. Friend—like other hon. Members—has made the case better than I can for a mixture of measures. It is not possible to say that benefits should be either all universal or all means-tested. There must be a mixture of benefits for the foreseeable future.
We must ask ourselves why the gap came about. First, it is the result of the changes that took place in the 1960s to occupational pensions when millions more people had the opportunity to take part in an occupational scheme. In addition, it is a consequence of SERPS. Very few people recognise the fact—I regret that many of my hon. Friends have not raised the issue—that a male pensioner who was on an average income and who retires today, just over 20 years after SERPS started, will retire with a SERPS pension of near enough £60 a week on top of the basic state pension. Before we introduced the link with earnings or prices—whichever was the higher—there was no state second pension or SERPS. SERPS was the only hope for people who did not have the good fortune to be in an occupational pension. However, we had to say that they would have to wait 20 years before the scheme came to fruition.
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At that time, we tried to ensure that pensioners did not lose out in periods of high inflation, which is what we Shad at the time, and that, when earnings and prices were yo-yoing with each other, we tried to mix the best of both. I was not in the Government at that time and I doubt whether the matter was discussed, but I cannot prove that when the forecasts were made for what SERPS would deliver in 20 years, the policy assumed that the basic state pension's link with prices or earnings—whichever was the higher—would be retained. The scenario was different, because it was a different world.
By law, the majority of the pensioner population is now forced into two pensions. They are either contracted in or contacted out, so they are virtually forced into two pensions. Obviously some people have missed out, and that is why have introduced the state second pension for the low paid and for carers.

Mr. Austin: After all my right hon. Friend's fine words, will he tell the House whether he could live on the present state pension?

Mr. Rooker: The answer is no. I would not dream of trying to do so. I do not think that any Member of Parliament should try that even though a Conservative Member once tried to do so. In one week, one does not face the problems of buying an iron or a kettle and there are not many clothes to buy, so that is not the issue. Nobody should be required to live on the basic state pension of £66.75 a week. That is not enough, and that is why the minimum income guarantee exists.

Mr. Tony Clarke: rose—

Mr. Archy Kirkwood: rose—

Mr. Rooker: I give way to the Chairman of the Select Committee on Social Security.

Mr. Kirkwood: The Minister is putting a brave face on the matter and concentrating on means testing and the relative incomes of pensioners. However, the national insurance fund is a contributory system and contributions

are, subject to the upper earnings limit, earnings related. I am certain that the right hon. Gentleman will acknowledge that the national insurance fund—certainly in my experience, and probably even in his—has never been in a better condition. The Government actuarial quinquennial review, which was published last July, made it quite clear that the Government Actuary believed that relinking pensions with earnings was affordable. Does the right hon. Gentleman accept that? If that is true, and given what was said in the review that was published last July, the money is available to re-establish the link as of this year.

Mr. Rooker: I have great respect for the hon. Gentleman, and his argument is seductive. However, the Government Actuary's report that I want to see is the one that will be produced now that we have made a policy announcement on inherited SERPS. All the Government Actuary reports published to date, including the specific one on the Bill, assume that inherited SERPS was not an issue and that, from March this year, pensions would drop from 100 to 50 per cent. The scenarios of the possible costs to the Government of inherited SERPS are for figures of between £8 billion and more than £20 billion, and I must tell the House that that money must come out of the national insurance fund because it is a national insurance fund benefit. We simply cannot operate on that basis.
Under the minimum income guarantee no one is expected to live on £66.75, the basic state pension. That is not enough. We know that the average single pensioner's total income—net of any tax—is £132 a week and, for a couple, the figure is £248. I know that people might argue that we do not come across many pensioners like that, but they exist and those are the average figures.
I am the first to admit that averages can be misleading. However, we cannot ignore the fact that average pensioner income is virtually double the basic state pension. That has happened because of SERPS and occupational pensions and—despite the fact that some were mis-sold—because of some personal pensions. That explains how the extra income is made up.
Although we shall not accept new clause 8, we recognise that the chances are that the older people get, the poorer they are likely to be. That is inevitable. By and large, they will be female. That is why, on the basis of next week's increase, MIG for pensioners aged 60 to 74 will provide an income of £78.45, which is well above the basic state pension. For those aged 75, the figure goes up to £80.85 and, for those aged 80, the figure is £86. The MIG figure for an 80-year-old is almost £19 a week higher than the basic state pension. We recognise that pensioner poverty is connected to age. There is no doubt about that, and, when we roll out the publicity machine for the MIG take-up campaign that we have announced, we shall target that group. We shall write to 2 million people.
We estimate that between 500,000 and 700,000 people are currently missing out. Why should that be the case? I am not sure whether or not it is due to stigma. I meet constituents and receive letters from them, but I have not met anyone for a long time who has said that they do not claim because of the stigma of the means test. They might say, "I'm not going down the social. I'm not going to Soho road along with that lot." They do not consider themselves to be beneficiaries, and there is something in


that because Governments have in the past treated pensioners as a block and mixed them up with everyone else who claims from the Benefits Agency.
Of our benefits payments of £100 billion a year, £47 billion, or 47 per cent., goes to pensioners, but only about 10,000 of the Benefits Agency's 80,000 staff work on pensions and pensioners, which is wholly disproportionate. That is why, three or four weeks ago, we announced that we will centralise pensions and move all aspects of pension planning and provision out of the Benefits Agency into a separate, free-standing agency responsible to the Department. We have started planning that only in the past couple of weeks, so I cannot say when it will start. That agency will deal with a big chunk of the Department's money.
It has been said that many pensioners who are entitled to MIG do not claim it even though they readily claim housing and council tax benefits. Why do they claim one and not another? Housing and council tax benefits are central Government money but they are delivered via local authorities, and pensioners can pop into what is, in my constituency, their friendly neighbourhood office. It is different from the social. There is therefore a paradox, in that pensioners will claim one means-tested benefit but not another because the delivery of the first is perceived to be more pensioner-friendly. That is why we are, as I have said, separating pensions from the Benefits Agency.
Many of my hon. Friends have read out the Government's record, including measures such as the free television licence for those over 75. The measure is worth £2 a week to those pensioners: that cannot be gainsaid. The winter fuel allowance this year is worth £3 a week to an individual or a household. For those over 75, that adds up to £5 a week that they would otherwise have spent out of their income. It is real money; it is not a token.
That is on top of all the other measures that we have included in the pensioner package, including the first-time concessionary fares for areas of the country that hitherto did not know what the words meant. Of course my city invented concessionary fares in 1956. That is not a benefit that I would boast about to my constituents, and I might add that it has been under threat when we have had the odd Tory controlled-council.
I say to my hon. Friends that it is unacceptable to use words such as "betrayal", "rottenness" and "failure". Those are unacceptable descriptions of the Government's package of policies for pensioners, rich or poor, since May 1997. Frankly, they feed the lie that those who are opposed to our party, from the left and the right, will permeate through society come the general election, and it is no good lending credence to that lie.

Mr. Winnick: Is my right hon. Friend aware that although I have absolutely no illusions about the poverty of many pensioners and I am glad about the minimum income guarantee, I will not be supporting the new clause simply because the Government have done more than they promised at the general election? They gave £100 of winter fuel allowance, which has now risen to £150, which many of us campaigned for year after year when the Tory Government refused to take action, and the same applies with the free television licence. Although I

certainly want the Government to do more on pensions, I recognise that much has been done, and no one could accuse me of looking for a job.

Mr. Rooker: Nor me. My hon. Friend is right.
I want to finish on a point that is not generally appreciated, and when we make it, people do not believe us, but it demonstrates the scale of the problem that we are dealing with among millions of our fellow citizens. The minimum income guarantee is at present targeted at 1.5 million people, who happily apply for it and collect it. We want to encourage the other 500,000 to do so. With the changes to MIG and the winter fuel payments, the pensioner population are receiving £800 million more in the first three years of this Parliament than they would have done if we had restored the link between the basic pension and earnings. I ask my hon. Friends to think about that.
We are unable to do everything that we want to do. I want to do more. There is not a single Minister or Back-Bench Labour Member who does not want the Government to do more. However, we have to tell the truth, and so far over this Parliament we have delivered £800 million more to the pensioner population—targeted, it is true, in the case of MIG, but as a balance the other measures are widespread—than we would have spent if we had simply raised the basic pension in line with earnings. That is a record that we should be proud of, and not one that we should attack.

Mr. Burstow: I want briefly to pick up on one or two of the points that have been made in this full and useful debate, which is about the importance that Members on both sides of the House attach to the basic state pension and the ways in which its role might be developed.
The Minister did not entirely address new clause 8. He said that the Government accepted its spirit but were unable to accept its terms. The new clause would give the Government a power, which they could choose whether or not to use, to introduce and uprate age additions to the basic state pension. That would be a useful power that the Government should take, and we urge hon. Members who agree with us to join us in the Lobby in support of the new clause to get extra money to our oldest pensioners, who the Minister and many other hon. Members have rightly acknowledged are almost always the poorest.
The debate about new clause 36 has been particularly good, and many powerful speeches have been made by Labour Members. I do not want to add to those; they speak for themselves, and I hope that the House will have the opportunity to divide on that new clause.
The debate has been about the future of the basic state pension. Is it a future of continuing erosion, so that we will have a state pension that is withering away, or is it one in which we will be able to be proud of the basic state pension, which people expect the House to protect? I believe that we should protect it.

Mr. McDonnell: On a point of order, Mr. Deputy Speaker. There is some confusion about the voting pattern this evening. Can you clarify that the vote on new clause 36 will come after the debate on new clauses 18 and 19?

Mr. Deputy Speaker (Sir Alan Haselhurst): I say to the hon. Gentleman and any other hon. Members who


may be confused that the vote on that new clause—if the occupant of the Chair is disposed to accept a vote—will come in the appointed order on the amendment paper from which we are working, and not immediately.

Question put, That the clause be read a Second time:—

The House divided: Ayes 39, Noes 275.

Division No. 136]
[8.28 pm


AYES


Abbott, Ms Diane
Hughes, Simon (Southwark N)


Allan, Richard
Jones, Dr Lynne (Selly Oak)


Ashdown, Rt Hon Paddy
Kirkwood, Archy


Ballard, Jackie
Llwyd, Elfyn


Benn, Rt Hon Tony (Chesterfield)
McDonnell, John


Brake, Tom
Maclennan, Rt Hon Robert


Brand, Dr Peter
Moore, Michael


Breed, Colin
Öpik, Lembit


Burnett, John
Rendel, David


Burstow, Paul
Sanders, Adrian


Campbell, Rt Hon Menzies (NE Fife)
Simpson, Alan (Nottingham S)



Stunell, Andrew


Chidgey, David
Taylor, Matthew (Truro)


Corbyn, Jeremy
Thomas, Simon (Ceredigion)


Cotter, Brian
Tonge, Dr Jenny


Davey, Edward (Kingston)
Tyler, Paul


Fearn, Ronnie
Webb, Steve


Field, Rt Hon Frank
Wood, Mike


Foster, Don (Bath)



Harris, Dr Evan
Tellers for the Ayes:


Harvey, Nick
Mr. Bob Russell and


Heath, David (Somerton & Frome)
Mr. Andrew George.




NOES


Ainger, Nick
Campbell, Mrs Anne (C'bridge)


Ainsworth, Robert (Cov'try NE)
Campbell, Ronnie (Blyth V)


Alexander, Douglas
Campbell-Savours, Dale


Allen, Graham
Caplin, Ivor


Anderson, Donald (Swansea E)
Casale, Roger


Anderson, Janet (Rossendale)
Caton, Martin


Armstrong, Rt Hon Ms Hilary
Cawsey, Ian


Ashton, Joe
Chapman, Ben (Wirral S)


Atherton, Ms Candy
Clapham, Michael


Atkins, Charlotte
Clark, Rt Hon Dr David (S Shields)


Austin, John
Clark, Dr Lynda (Edinburgh Pentlands)


Banks, Tony



Barnes, Harry
Clark, Paul (Gillingham)


Barron, Kevin
Clarke, Charles (Norwich S)


Bayley, Hugh
Clarke, Eric (Midlothian)


Beard, Nigel
Clarke, Tony (Northampton S)


Beckett, Rt Hon Mrs Margaret
Clelland, David


Begg, Miss Anne
Clwyd, Ann


Bell, Martin (Tatton)
Coaker, Vernon


Benton, Joe
Coffey, Ms Ann


Bermingham, Gerald
Cohen, Harry


Berry, Roger
Coleman, Iain


Betts, Clive
Colman, Tony


Blears, Ms Hazel
Connarty, Michael


Blizzard, Bob
Cooper, Yvette


Blunkett, Rt Hon David
Corbett, Robin


Boateng, Rt Hon Paul
Cousins, Jim


Bradley, Keith (Withington)
Crausby, David


Bradley, Peter (The Wrekin)
Cryer, John (Hornchurch)


Bradshaw, Ben
Cunningham, Jim (Cov'try S)


Brinton, Mrs Helen
Dalyell, Tam


Brown, Rt Hon Nick (Newcastle E)
Darling, Rt Hon Alistair


Browne, Desmond
Darvill, Keith


Buck, Ms Karen
Davey, Valerie (Bristol W)


Burden, Richard
Davidson, Ian


Byers, Rt Hon Stephen
Davies, Geraint (Croydon C)


Caborn, Rt Hon Richard
Dean, Mrs Janet


Campbell, Alan (Tynemouth)
Dismore, Andrew





Dobbin, Jim
Liddell, Rt Hon Mrs Helen


Donohoe, Brian H
Linton, Martin


Doran, Frank
Lock, David


Dowd, Jim
Love, Andrew


Eagle, Angela (Wallasey)
McAvoy, Thomas


Eagle, Maria (L'pool Garston)
McCabe, Steve


Edwards, Huw
McDonagh, Siobhain


Ennis, Jeff
Macdonald, Calum


Fisher, Mark
McFall, John


Fitzsimons, Lorna
McNulty, Tony


Flint, Caroline
Mactaggart, Fiona


Follett, Barbara
McWalter, Tony


Foster, Rt Hon Derek
McWilliam, John


Foster, Michael Jabez (Hastings)
Marsden, Gordon (Blackpool S)


Foster, Michael J (Worcester)
Marsden, Paul (Shrewsbury)


Foulkes, George
Marshall, Jim (Leicester S)


Galloway, George
Marshall-Andrews, Robert


Gardiner, Barry
Maxton, John


Gerrard, Neil
Meacher, Rt Hon Michael


Gilroy, Mrs Linda
Michie, Bill (Shef'ld Heeley)


Godman, Dr Norman A
Miller, Andrew


Goggins, Paul
Moffatt, Laura


Golding, Mrs Llin
Moonie, Dr Lewis


Gordon, Mrs Eileen
Morley, Elliot


Griffiths, Jane (Reading E)
Morris, Rt Hon Ms Estelle (B'ham Yardley)


Griffiths, Nigel (Edinburgh S)



Grocott, Bruce
Mountford, Kali


Grogan, John
Mullin, Chris


Hall, Mike (Weaver Vale)
Murphy, Denis (Wansbeck)


Hamilton, Fabian (Leeds NE)
Murphy, Jim (Eastwood)


Heal, Mrs Sylvia
Murphy, Rt Hon Paul (Torfaen)


Healey, John
Naysmith, Dr Doug


Henderson, Doug (Newcastle N)
Norris, Dan


Henderson, Ivan (Harwich)
O'Brien, Mike (N Warks)


Heppell, John
Olner, Bill


Hill, Keith
O'Neill, Martin


Hinchliffe, David
Osborne, Ms Sandra


Hoon, Rt Hon Geoffrey
Palmer, Dr Nick


Hope, Phil
Pearson, Ian


Hopkins, Kelvin
Pendry, Tom


Howarth, Alan (Newport E)
Perham, Ms Linda


Howells, Dr Kim
Pickthall, Colin


Hoyle, Lindsay
Pike, Peter L


Hughes, Ms Beverley (Stretford)
Plaskitt, James


Hughes, Kevin (Doncaster N)
Pollard, Kerry


Humble, Mrs Joan
Pond, Chris


Hurst, Alan
Pound, Stephen


Hutton, John
Powell, Sir Raymond


Iddon, Dr Brian
Prentice, Ms Bridget (Lewisham E)


Illsley, Eric
Prentice, Gordon (Pendle)


Jackson, Ms Glenda (Hampstead)
Prescott, Rt Hon John


Jackson, Helen (Hillsborough)
Prosser, Gwyn


Jamieson, David
Purchase, Ken


Jenkins, Brian
Quin, Rt Hon Ms Joyce


Johnson, Alan (Hull W & Hessle)
Quinn, Lawrie


Johnson, Miss Melanie (Welwyn Hatfield)
Radice, Rt Hon Giles



Raynsford, Nick


Jones, Rt Hon Barry (Alyn)
Reed, Andrew (Loughborough)


Jones, Helen (Warrington N)
Reid, Rt Hon Dr John (Hamilton N)


Jones, Jon Owen (Cardiff C)
Roche, Mrs Barbara


Jones, Martyn (Clwyd S)
Rooker, Rt Hon Jeff


Kaufman, Rt Hon Gerald
Rooney, Terry


Keeble, Ms Sally
Ross, Ernie (Dundee W)


Keen, Alan (Feltham & Heston)
Rowlands, Ted


Kemp, Fraser
Roy, Frank


Kennedy, Jane (Wavertree)
Ruane, Chris


Khabra, Piara S
Ruddock, Joan


Kidney, David
Ryan, Ms Joan


Kitfoyle, Peter
Salter, Martin


King, Andy (Rugby & Kenilworth)
Savidge, Malcolm


King, Ms Oona (Bethnal Green)
Sawford, Phil


Laxton, Bob
Sedgemore, Brian


Lepper, David
Sheerman, Barry


Leslie, Christopher
Short, Rt Hon Clare


Levitt, Tom
Singh, Marsha


Lewis, Terry (Worsley)
Skinner, Dennis






Smith, Rt Hon Andrew (Oxford E)
Trickett, Jon


Smith, Angela (Basildon)
Truswell, Paul


Smith, Jacqui (Redditch)
Turner, Dennis (Wolverh'ton SE)


Smith, John (Glamorgan)
Turner, Dr George (NW Norfolk)


Smith, Llew (Blaenau Gwent)
Turner, Neil (Wigan)


Snape, Peter
Twigg, Derek (Halton)


Soley, Clive
Twigg, Stephen (Enfield)


Southworth, Ms Helen
Walley, Ms Joan


Spellar, John
Ward, Ms Claire


Squire, Ms Rachel
Watts, David


Steinberg, Gerry
White, Brian


Stevenson, George
Whitehead, Dr Alan


Stewart, David (Inverness E)
Williams, Rt Hon Alan (Swansea W)


Stewart, Ian (Eccles)



Stinchcombe, Paul
Williams, Alan W (E Carmarthen)


Stoate, Dr Howard
Williams, Mrs Betty (Conwy)


Stringer, Graham
Wills, Michael


Stuart, Ms Gisela
Winnick, David


Sutcliffe, Gerry
Woodward, Shaun


Taylor, Rt Hon Mrs Ann (Dewsbury)
Woolas, Phil



Worthington, Tony


Taylor, Ms Dari (Stockton S)
Wright, Anthony D (Gt Yarmouth)


Taylor, David (NW Leics)
Wright, Dr Tony (Cannock)


Temple-Morris, Peter
Wyatt, Derek


Thomas, Gareth (Clwyd W)



Thomas, Gareth R (Harrow W)
Tellers for the Noes:


Tipping, Paddy
Mrs. Anne McGuire and


Touhig, Don
Mr. Greg Pope.

Question accordingly negatived.

New Clause 10

RATE OF INTRODUCTION OF STATE SECOND PENSION

'—(1) In this section—

a "SERPS year" is any financial year from 1978–79 to the year before the first appointed year; and
a "State Second Pension year" is any financial year from the first appointed year onwards.

(2) This section shall apply to any person reaching pensionable age after the end of the first appointed year.
(3) In each State Second Pension year in which a person accrues state second pension entitlement, that person may elect to accrue an additional year's entitlement in respect of that year in substitution for their additional pension entitlement in respect of one SERPS year.
(4) Such substitution may only take place in respect of SERPS years in which that person either paid National Insurance Contributions or was entitled to credits in lieu of National Insurance Contributions.
(5) The Benefits Agency shall be required to notify any person to whom this section applies of their rights, and shall explain how those rights may be exercised to produce the maximum total entitlement to additional pension.'.—[Mr. Webb.]

Brought up, and read the First time.

Mr. Webb: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this, it will be convenient to discuss the following: New clause 14—Enhancement of the state personal pension—
'.—(1) A person shall be entitled to one extra year's accrual of State Second Pension—

(a) for every four years in which that person paid National Insurance Contributions; or
(b) for every four years in which that person was eligible for Home Responsibilities Protection.
(2) The accrual to which a person is entitled under subsection (1) above shall be at the Stage 2 flat rate of the State Second Pension.'.

Amendment No. 67, in clause 30, page 26, leave out lines 30 and 31.

Amendment No. 64, in page 27, line 33, at end insert—
'(4A) an employee who is of pensionable age within subsections (2), (3) or (4) above shall be entitled—

(a) to have secondary contributions paid by an employer on his salary which shall contribute to his pension entitlement; and
(b) to make primary contributions which shall accrue towards the state second pension.'.

Amendment No. 69, in schedule 4, page 94, leave out lines 23 to 27.

Amendment No. 6, in page 94, line 38, at end insert—
'(9) If the application of the above percentages should produce an entitlement to additional pension such that a person entitled to a full basic pension and a full additional pension on reaching pensionable age would be expected to have recourse to Income Support within 15 years of pensionable age, there shall be inserted instead of '40' in Table 1 and Table 2 the lowest such percentage as would be required to ensure that he did not become entitled to Income Support within 15 years of reaching pensionable age.'.
Amendment No. 91, in page 95, line 5, after second "tax", insert "quarter".
Amendment No. 94, in page 95, line 7, leave out "tax week" and insert "quarter".
Amendment No. 92, in page 95, line 10, after second "tax", insert "quarter".
Amendment No. 93, in page 95, line 11, after "the", insert "quarter".
Amendment No. 96, in clause 34, page 31, line 9, after "appointed;", insert—
'and the first appointed year shall not precede the publication and distribution of guidance from the Financial Services Authority concerning those income groups for whom in its opinion, stakeholder pensions are likely to be suitable, and those for whom State Second Pension is likely to be suitable.'.

Mr. Webb: The purpose behind new clause 10 is to introduce the state second pension more quickly, and amendment No. 6 deals with the level of that pension. The new clause recognises that many people at a late stage in their working life will, potentially, have had many years under SERPS and relatively few years under the state second pension scheme. Under the Government's proposals, those people will see virtually no improvement in their eventual second pension from the state.
If the new clause were accepted, for each year that such people were members of the state second pension scheme they could substitute an additional year's membership of that scheme in lieu of a year's membership of SERPS. Given that the Minister has said that the state second pension is more generous for the low paid and for carers, the new clause would in effect say to those people, "We are concerned about your inadequate second pension provision not only in 2047 but for the next few years, and we shall bring in the new scheme more quickly."
How quickly can a new pension scheme be introduced? The Minister's response generally is that these schemes take a long time to mature and cannot be hurried. Schemes like SERPS allow 20 years to take effect; the danger is that, by the time 15 or 10 years have elapsed, they will have been hacked by successive Governments. The state second pension scheme will take about 45 years to come in and will probably never see maturity. The graduated pension scheme lasted for about 15 years. SERPS,


before it was modified, lasted for about 10 years; the state second pension scheme will never get there if it is not allowed to establish itself quickly in the public's perception. It is much harder to cut something that people are starting to get than something that they might get in some distant decade.
We believe that the needs of pensioners in poverty are much more urgent than the leisurely pace at which the state second pension will be introduced. The Minister tells us that it will double the figures for people on certain income levels and quadruple them for those on others, but none of these statements will be true until 2047, when the whole scheme takes effect. That is beyond a realistic time scale.
The Government have set out their strategy for doing something this year if there is a problem of pensioner poverty. They have also set out their strategy for doing something in 2047, but there must surely be something between now and then. If the Government believe that second state pensions are a key part of that process, as the Minister has said he does, it will be a mistake to allow decades to pass before any real benefit is felt. In a written answer to me, the Minister indicated that by 2025, which is surely a reasonable time for Government policy to begin to have an impact, the poorest 20 per cent. of pensioners will on average be only £1.30 a week better off. The richest 20 per cent. will be better off by a similar amount. The scheme will not be redistributing effectively in 25 years' time.
The thinking behind the new clause is sympathetic to what the Government are trying to do through the state second pension. It is not how we would have done things, but if they are to go ahead with the second pension, we are saying that it should take effect more quickly, and new clause 10 would have that effect. The clause would especially favour women, who could forgo their entitlement under SERPS for a given year and substitute a state second pension year of entitlement. That would favour parents with young children and the lower paid, who predominantly would be women. Given that we know that pensioner poverty of the future, as of the past, is predominantly a female phenomenon, the new clause would target that poverty without means testing.

Mr. Burstow: I am grateful to my hon. Friend for giving way. Can he confirm that, even when the state second pension reaches maturity in 2047, those who start to draw it will rapidly—within five, 10 or 15 years—fall back on to means-tested benefits?

Mr. Webb: My hon. Friend gives me an unscripted but neat link into the second part of my remarks, focusing on the level of the state second pension. Amendment No. 6 would ensure that the combined value of the basic state pension, which is gradually ebbing away, and the state second pension would not be such that when a person reaches state pension age and lives an average life expectancy, he would be back on means-tested benefits before he dies. That is the nub of amendment No. 6.
We have used the figure of 15 years in the amendment as the typical life expectancy for a man aged 65. The accrual rate of the state second pension should be such

that someone who lives an average life span from the state pension age should not have to claim the means-tested benefit before he dies.
Clearly, we can argue about the detail of the amendment, but we are trying to highlight the principle—the adequacy of provision. The hon. Member for Birmingham, Selly Oak (Dr. Jones) pointed out that the combined value of the basic and second state pension as a fraction of average earnings will be below the level of the basic state pension at the end of the 1970s as a fraction of average earnings. A Government who seek to tackle pensioner poverty, but who leave many people who will reach pension age in 40 or 50 years expecting to draw a means-tested benefit before they die, are not being brave enough.
We can argue about the adequacy of present provision, but with 50 years to sort the system out, surely the Government could at least ensure that our oldest pensioners do not have to rely on means-tested benefit, especially if they are getting the full basic and the full state second pension.
That is the Government's answer to pensioner poverty—the basic pension combined with the state second pension. If that is not enough to keep pensioners out of poverty—not just the year that they retire, but into old age, which is likely to be increasingly old age as the years go by—it is an inadequate response.
Two issues are raised in our amendments. New clause 10 deals with the rate at which the state second pension comes in; 50 years is too long. Amendment No. 6 deals with the level; letting people end up on means-tested benefit is not adequate.

Dr. Lynne Jones: I shall speak to amendments No. 67 and 69. I had hoped that today I would be in Washington with the Select Committee on Science and Technology to conduct our inquiry into cancer treatments. However, I feel so strongly about the issue of pensions policy that I am here today instead.
The Government are not getting it right on pensions. I offer these and other amendments later as suggestions for improving the Bill. I offered to participate in the Standing Committee that considered the Bill, and I thought from the Minister's comments in his winding-up speech on Second Reading that there might be an opportunity for me to contribute, but unfortunately the Whips seemed to think otherwise.
It is no secret that I believe that the framework of the Bill is far from perfect. I hope that the Government will use opportunities elsewhere to bring about some improvement.
During Question Time, the Minister did not dispute my assertion that the combination of the basic state pension and the state second pension, when they are fully mature in about 50 years, will pay out a lower proportion of average earnings than did the basic state pension in 1980.
The Green Paper on welfare reform was subtitled "New ambitions for our country". I hardly think that in the middle of the 21st century, in one of the richest countries in the world, to be paying out to a large proportion of pensioners a level of income that is scarcely above the means-tested benefit is much of an ambition.
"Opportunities for All", which the Government published, showed that after a lifetime of working, pensioners would be between £9 and £16 better off on the


state second pension and, as Liberal Democrat Members pointed out, that sum would be eroded in a few years and pensioners would be back on means-tested benefit.
The state second pension is a substitute for properly uprating the basic state pension, against which the Government have set their face. However, I cling to the Minister's words that the manifesto commitment was to uprate the basic state pension at least in line with prices. I hope that there will be an improvement in future uprating.
The state second pension replaces the proper basic state pension. Amendment No. 67 would therefore extend the category of people who will be credited into the state second pension to include those who are unemployed or whose earnings are below the lower earnings threshold, which is currently £67 a week.
Even someone on the minimum wage who works for 16 hours a week—for example, many women who cannot work full-time because of family responsibilities—will not be passported into the state second pension. That also applies to the unemployed. At the moment, unemployed people are credited with national insurance contributions for the basic state pension. If the state second pension really replaces the basic state pension, it would be logical to credit unemployed people into the state second pension.
The Government may argue that that is a disincentive to work. However, we are considering a deferred benefit from which people derive no immediate gain. When people who have been out of work have a period of employment, the disincentive to save that the prospective loss of means-tested benefit represents will be greater than for other groups. Their basic state pension will be further from the minimum income guarantee than the state pension is now.
Crediting the unemployed into the state second pension will not discourage them from working but will encourage them to save for retirement when they are in work. We should not forget that, for the better off, breaking the link between employment and tax relief for the stakeholder pension means that a substantial tax benefit per pension is available to those who do not work. However, making pension contributions is out of the question for most unemployed people. I hope that the Government will consider granting entitlement to the state second pension to those who are unemployed or whose earnings mean that they do not qualify under the proposed arrangements.
The Government intend to change the state second pension from an earnings-related pension to a flat-rate scheme. Amendment No. 69 would delete the power to make that change. The first stage of the state second pension will be earnings related. The Government state that, at that stage, people who earn less than £21,600 will receive more than they would have received under SERPS, while those earning £21,600 and more will receive the same amount. However, in time the Government want to encourage everyone earning more than £9,500 to contract out to a non-state-funded scheme.
The second stage, which is to be introduced once stakeholder pensions have become established, will change the state second pension into a flat-rate scheme for those with a significant part of their working life ahead of them—for example, those under 45 at the point of

change. Once the scheme becomes flat rate, the intention is that everyone will be better off contracted out to a stakeholder pension or another non-state-funded scheme. To encourage the better off to opt out, the Government are prepared to put up a lot of money in generous rebates, which they say are likely to cost about £12 billion to £15 billion. That will be all very well if people contract out to good, defined benefit pension schemes, but it will be another matter if they make money purchase pension arrangements with no guaranteed level of benefits.
The Government can do and are doing a lot to provide better value for money from private pension arrangements by driving down charges. Even so, a 1 per cent. charging regime will eat up 25 per cent. of any pension fund and there is no guarantee that stakeholder pensions will give a good return. Are people on modest earnings keen to have their pension on a risk basis? Do we approve of people on low incomes gambling with them? Many may do no more than put the minimum national insurance rebates into their scheme, as many did for personal pensions.
The position of those with earnings that vary above and below the £9,500 threshold ought to be considered by the Government. Women in particular are in that category and their incomes often fluctuate when they take time out for their caring responsibilities. Would it make sense for them to switch between the state second pension and stakeholder pensions, as each at times apparently offers better value? Will they stay in the state second pension and lose in their good years what they had gained in their bad? Despite all its shortcomings after Tory cuts, SERPS still enjoys considerable public support, which can be interpreted sensibly only as support for a concept. That concept is a decent, good-value, earnings-related defined benefit scheme that offers a natural home for all those on moderate earnings who are not fortunate enough to be in a good employer scheme.
Under the Government's proposals, the state second pension scheme will become a pension for the low paid. Encouraging everyone earning more than £9,500 to opt out means that it will become solely for people with no or very low earnings—a pension for the relatively poor. That could mean that voters will have less interest in maintaining it, particularly if it takes a long time to build up, which seems to be the case. It will also limit choice. I see no reason why those with higher earnings should not have the choice to continue to join the scheme, with benefits reflecting the contributions made. The Government should consider being as generous to those who want to stay in the state second pension as those who want to opt out.
In opposing stage 2—making the state second pension flat rate—we could at least argue that we are honouring our manifesto commitment to retain a state earnings-related pension, even if it is not exactly SERPS. It is appropriate to remind my right hon. Friend the Minister of that commitment and I hope that the Government will reconsider their decision to move the state second pension to a flat-rate scheme.
It is important to put those arguments on the record, but I shall not press the amendments to a vote. The pensions officer of the Manufacturing, Science and Finance Union helped me with the drafting and 1 hope that the Government will consider these suggestions, which are supported by Age Concern, as a positive contribution to improving the Bill.

9 pm

Mrs. Lait: I shall speak to new clause 14 and amendments Nos. 64 and 96, but not to amendments Nos. 91 to 94, as we want to move on. May I say how sad I was that the hon. Member for Birmingham, Selly Oak (Dr. Jones) did not join us on the Committee? We noticed the offer that was made to her, and were looking forward to some entertaining debates.

Mr. Rooker: indicated assent.

Mrs. Lait: I see that the Minister agrees. Unfortunately, the iron hand got in the way.
It is obvious from what the hon. Members for Northavon (Mr. Webb) and for Selly Oak said, and from new clause 14, that there is serious concern in the House about the state second pension's ability to keep people off means-tested benefits. All of us would agree that that is what we want to achieve. We had endless debates in Committee on this subject, and we received many reassurances that the state second pension would achieve that.
Last week, in Westminster Hall, we had an exchange on this subject, when the right hon. Gentleman pointed out that, if a couple were both on at least the state second pension, they would be above the minimum income guarantee level. We acknowledge that, but the problem is that not everyone will be in that situation. Often, only one of a couple is left at retirement age. I regularly argue that, when people are earning a moderate income and the children are at their expensive stage, if it is a question whether to spend money on a pension or on the kids' trainers, the trainers usually win. However flexible we make the state second pension or the stakeholder pension, those people will unfortunately find it difficult to save.
The hon. Member for Northavon referred to the attraction of the state second pension or the stakeholder pension in 2025 or 2050. There is much doubt about how much extra pension people will get, and whether, being rational economic beings, they will decide on the balance of probability that they are better off with a pension than relying on a minimum income guarantee related to earnings. There are problems with trying to make the state second pension in particular sufficiently attractive for people to want to save for their retirement under such a scheme.
I wish the campaign on the minimum income guarantee well. We shall keep an eye on its success, and will monitor it to see how effective it is, because we can always learn good techniques to encourage people to do the right thing. If we truly believe that people should have a pension and not benefits, we should address the issue of the interaction between the MIG and the state second pension.
I believe the Minister of State because he is a most determined and clear-thinking person. I believe that he is seriously committed to the success of the state second pension, but I have a feeling that there is a lack of understanding and that the Government are not prepared to admit that there is a flip-side to this argument, which is that people may opt for income support in retirement.
Our suggestion is another version of the variations proposed by the Liberal Democrats and the hon. Member for Selly Oak. We have come up with yet another way of making the state second pension more attractive to people.

We suggest that, if someone is deemed to have had four years' credits towards a state second pension and/or four years of working entitling them to credits towards the state second pension, they should get an extra year's accrual. The objective is to lift those people out of the area in which income support is more attractive.
A knee-jerk reaction is that this must cost money but, set against the cost of income support, the cost of the extra year's accrual would be modest, and would moreover be worth while in giving people the self-respect that having their own pension would confer. It would also give people an incentive to save for that pension.
In Committee, I presented a proposal which, I freely admit, may not have been drafted as well as it might have been. I am equally prepared to admit that amendment No. 64 may not have been drafted as well as it might have been, but, as we are not going to press it to a vote, it may be useful to have an exchange about it.
Amendment No. 64 suggests that those who are over the inflexible age of 65 for the purposes of the state pension—for women, 60, moving up to 65—should, if they wish to continue working, be able to contribute further, through national insurance, to enhance their state second pension. Obviously, we want to encourage people to have a better second pension, but we also want the state to recognise, as it does not, that there will almost inevitably be a need for people to retire flexibly as demography changes.
Fewer and fewer younger people will enter working-age groups. Meanwhile, those whom we have historically regarded as being of an age to retire will want to work, will be well enough to work, and will present great value to employers because of their knowledge, experience and steadiness. They will also play a key role in charitable and voluntary work, for which more and more people are being paid. It would seem sensible to allow people over the state pension age to contribute if they wish to.
As for amendment No. 96, let me pick up some of the points made by the hon. Member for Selly Oak about the success of the stakeholder pension before the target group moves from the state second pension. We have received many assurances from the Minister—I believe him—that, before stage 2 of the state second pension is reached, when everyone goes on to a flat rate, there will be a debate in the House, and the success of the stakeholder pension will be assessed. What we have not heard from the Minister is a description of the target market.
No one puts a new product such as this into the market without having a clear idea of what the market is. In simplistic terms, we are talking about people earning between £9,500 and £21,000 a year, but subsequent clauses and amendments suggest that not just that group is involved. Excluded from it are people who could potentially take advantage of a tax break. There are people who may be earning a small amount, but whose husbands or wives are earning a reasonable income. Are they part of the target market? How many people are in the target market? From what circumstances are they meant to be able to benefit in the target market?
We are asking the Financial Services Authority—which, because of its wide experience of different financial products, will understand markets—to help the Government to define the target market, and to say whether it represents a good deal. We have a serious concern about whether the stakeholder pension and the


state second pension will be a good deal, and about whether, rationally, people should not go on to the minimum income guarantee.
Before people make those decisions, they should go through the process illustrated in a decision tree, and the Government have rightly included types of decision trees in some of their consultation documents. However, the purpose of any decision tree is to guide people through a series of yes/no questions, whereas the decision tree in the Government's document regularly states, "Seek help," "Always seek help," "Ask your employers for details," "Should seek help," "Probably will be a better choice for you—seek help." The Government's decision tree regularly admonishes people to seek help, but it does not assist them in making a decision.
Unless the Government are careful, they are in grave danger of setting themselves up for another mis-selling scandal. There is a danger not only because the Government are encouraging people to make a decision that would perhaps not be in their best interests, but because they are not encouraging people to make a more fundamental decision. There is a presumption that a pension is best for everyone. Although I would not disagree with that, there are those whose best interests may be served by being on income support.
I suggest most humbly that, if the Government wish to encourage people to choose a state second pension or stakeholder pension, people should first be clear in their own minds about whether that is the best choice for them. The decision tree that the Government are encouraging people to use should deal with those basic issues.
I hope that the right hon. Gentleman will be able to deal with the points that I have made on those three amendments. I look forward to hearing what he has to say.

Mr. Jim Cousins: I support amendments Nos. 67 and 69, with which I have identified myself. I do not intend to detain the House for very long.
I have a slightly different view on the issues that we are debating from some of my hon. Friends who have spoken in the debate, broadly speaking, from below the Gangway. The opinion that I expressed in the debate on Second Reading—I hold it even more strongly now—was that the state second pension proposal is a fundamental and significant innovation for two reasons. The first is that it will extend the network of the state pension to spheres that the current contributory system simply does not reach. The proposal is therefore extremely radical. It will affect those who live in social conditions that are not reached at all by the state pension system. I give great credit to my right hon. Friend the Minister of State for his part in developing the proposal, which is a powerful mechanism for the future.
I tell the hon. Member for Northavon (Mr. Webb) that many people will accrue entitlements to the state second pension when they are experiencing particular responsibilities or obligations that they do not have in other times of their lives. Therefore, the state second pension will continue to top up a pension entitlement that, in other times of those people's lives, was generated by quite different mechanisms. It is an extremely important aspect of the proposal.
The accrual rate of the benefits generated by the state second pension is the second significant feature of the proposal. For those earning £10,000 or £11,000 annually,

the state second pension will be the best pension product ever offered to the British people. The Government should be given considerable credit for that.
The point of amendments Nos. 67 and 69, however, is to make it clear that it would be very good indeed if the benefits of the state second pension could be extended even further to those who are not reached by the contributory system.
9.15 pm
It is also important that the state second pension is not later switched back to a flat-rate benefit. My right hon. Friend the Minister said during Question Time today that there were 18 million potential beneficiaries of the state second pension. He will correct me if I am wrong. More than half of those have earnings above the target level of £9,500 a year. The bulk of the benefit of the state second pension will go to people who, at some point in the future, may be excluded from it.
Part of the purpose of the amendments is to put off and change that exclusion. If people are to be excluded from the non-flat-rate parts of the state second pension, the stakeholder pension—a voluntary, defined contribution scheme in which the pattern of contributions is determined by the contributor—will bear an unreasonable weight of responsibility throughout the income ranges. The stakeholder scheme will be rescued if a non-flat-rate state second pension is able to continue to provide earnings-related benefits on the favourable basis on which the scheme has been designed. I hope that my right hon. Friend will find that my simple points are sympathetic to his scheme.
This brief debate has been interesting. When the state second pension scheme was first proposed, there were all manner of doubts about it. Interestingly, many of the Opposition amendments tonight would extend its benefits. The power of the state second pension scheme is now acknowledged by all. It does not seem unreasonable to extend its benefits to wider categories of people and embed it firmly as an essential building block of the pensions system of the future.

Mr. Rooker: The hon. Member for Beckenham (Mrs. Lait) said that there were certain issues that she would not raise, so I junked most of my notes in the interests of brevity. The hon. Member for Northavon (Mr. Webb) was very brief and stuck to the point. If I do not cover something that I should, hon. Members should come back to me on it. I am trying to truncate my speech.
It bears repeating that the state second pension is a reform of SERPS that refocuses help on those who need it most. Some 4.5 million low earners will get more than double what they would have got under SERPS. Two million carers and a similar number of long-term disabled people will also build up a second tier pension for the first time. In addition, 9.5 million moderate earners—earning between £10,000 and £20,000 a year—will gain.
It is probably better for me to respond to the points that have been made than to whip through my notes. Commentators often suggest that people would be better off on the minimum income guarantee. Some highly paid so-called journalists have given unprofessional advice. It is compulsory for people to pay into a second pension—either SERPS, which will become the new state second pension, or an occupational or personal pension scheme. Employees


cannot choose to clear off out of all the provision and go into the MIG, because if they are working they will be paying national insurance, and if they are not contracted out they will be paying it at the full rate.
I am grateful to my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) for what he said about the fundamentals of the scheme. It is true that it is our intention that in stage 2 the state second pension should be a flat rate, but we will not do that until we are satisfied that the stakeholder system is established. We have not yet defined what we mean by its being established, but we will certainly have to in due course. It would not mean a short time, and I would generally take the lifetime of a Parliament—certainly not less than three to five years—to be a suitable period.
The hon. Member for Beckenham referred to the target group. There is not a moving target, although it might look that way. The target group consists of those with moderate incomes of between £10,000 and £20,000 a year, with no second pension provision, whose jobs may be peripatetic and who may move in and out of different scales.
There are 5 million people with earnings between £10,000 and £20,000 a year, 3 million of whom have no second pension provision. I am not denying that, in order to encourage those people and make pensions politically sexy for them, we have made the system user-friendly and flexible, so—it is true—it can be used to purchase a pension for a non-earning spouse or a child. People may call that tax avoidance, but I say that it is still a pension at the end of the day. It is not a tax fiddle, because it is not like putting the money into an individual savings account, which can be cashed in. Money in a pension stays there until it is drawn as a pension.
The price that we pay for flexibility and user-friendliness is that many people other than the target group will have a stakeholder pension, and some will no doubt move from personal to stakeholder pensions. That is not how we will measure our success; we will measure it by the results in the target group.
My hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) rightly raised the question of those with earnings fluctuating around the limit. I deeply regret the fact that she could not join us in Committee. Of course, I do not organise these matters, but I certainly cast a vote for her. The new arrangements for people who are contracted out were designed specifically to deal with fluctuating earnings.
The state second pension top-up payments will be payable for earnings under £9,500. If people's earnings go above that amount, the national insurance rebate will be sufficient to give them an amount of pension broadly equivalent to what they would have received had they remained in the state scheme. The top-up system means that people will not have to face what I recognise would be extremely difficult decisions.
My hon. Friend the Member for Selly Oak asked me about another matter at Question Time. I now have some more information and I certainly want to give her the best answer that I can. The state second pension and the basic pension in 2050 for low earners will be about 25 per cent. of average earnings—roughly the same proportion as the basic pension was in 1980—but that level of average

earnings will be more than double today's level in real terms. If she is not satisfied with that answer, I will be happy to answer further parliamentary questions.
Amendment No. 96 would require the introduction of stage 1 of the state second pension to be postponed until the Financial Services Authority had published guidance setting out for which income groups stakeholder and state second pensions were suitable. We do not think that it is necessary to put everyone through that hoop.
Stakeholder pensions are not compulsory—people can remain in the state second pension—and we have no plans for them to become compulsory. A judgment will have to be made in due course as to whether enough of the target group have been persuaded to join the stakeholder pension and, if not, why not. We need to get everyone who is working into a good second pension. If they are not, they will be in real trouble when they retire. The policy has not been ruled out, but there are no plans—let us be realistic about that.
We have worked closely with the FSA to develop the policies on the stakeholder pension. I have not seen the latest versions of the decision trees. As I said in Committee, just before Christmas, I went to one presentation of the FSA's work, which is highly sophisticated. There is a good understanding among those involved in the industry, among those in my Department and among the regulators that we must get people into such schemes, without mis-selling, making it simple and easy to do that and to understand the scheme. The decision trees are part of that. They are not the only answer, however.

Mrs. Lait: Does the work on decision trees go back to the basic balance between income support and pensions?

Mr. Rooker: I am coming to income support. I will not dodge that issue, but the hon. Lady is right to raise it.
Amendment No. 69 would remove the provision to introduce the second stage of state second pension, making it a flat rate. As I have explained, our proposal to move to the second stage when conditions are right is designed to give the Government flexibility to give a strong incentive to moderate and to higher earners to move to funded schemes.
We make no bones about that. We make no apology. It is not a secret policy. It is part of the overall big picture—the plan to shift pension provision from 60 per cent. state and 40 per cent. private to 40 per cent. private and 60 per cent. state. [Interruption.] I shall do it the other way around. It is part of our overall plan to move from 60 per cent. public and 40 per cent. private to the other way around. Everything fits into that. I have said that so many times it is ridiculous to get it wrong.
New clauses 10 and 14 would both boost entitlement. The ideas behind them are wholly laudable; I make no criticism of that. They would do it through retrospection and by allowing contributors to accrue more years' entitlement than they actually pay for. It is novel and innovative. It is one extra year for every four. It has some seductiveness.
There are two arguments in respect of those new clauses: first, whether we should provide additional help to specific groups; and, secondly, the need to maintain a balance between providing help to those who need it most


and managing the overall cost. We do not believe that it is fair to provide additional boosts to certain groups, rather than to all state second pension beneficiaries.
It is no secret that retrospection is an issue that we have considered. We discussed it Upstairs in Committee, but to allow retrospection for everyone would be prohibitively expensive and operational difficulties mean that it is not possible—I am sorry; it is those computers again—to allow retrospection in many cases. It is not just computers but lack of records. As a result, it is not a viable proposition.
Our proposals for the state second pension strike a balance. The amendments would change that balance. For example, new clause 14 alone would add £8 billion a year to the long-run cost—the cost by 2050. New clause 10 would add £3 billion to the long-run cost. That gives hon. Members some idea of the scale. I shall not repeat the points that we have made: without the changes, many more people would retire on the MIG.
Amendment No. 67 seeks to exclude the requirement for low earners to have earnings at or above the annual lower earnings limit to benefit from the low earner's boost. However, the state second pension is a contributory benefit based on earnings factors. There is no doubt about that. It is not a free ride. To have an earnings factor, a person must have had earnings on which national insurance contributions have been paid, or treated as paid.
The amendment would give the low earner's boost to anyone who had as little as one week's earnings in a year over the weekly lower earnings limit, which, from this April, will be £67. However, it would not include people with earnings of less than £67 for every week of the year. That would lead to some pretty perverse outcomes. There would be an incentive for the economically inactive to find part-time work for a single week to qualify for the state second pension. We do not think that that is fair.
9.30 pm
Finally, I turn to the minimum income guarantee, which is generally quoted in relation to individual citizens. I accept that not everyone is part of a couple, even at retirement, but that is the norm for most of the population. However, the key point is that the MIG is not an individual benefit. The means test is applied to the couple, not the single person. Therefore, although the relevant figures, assessments and advice for single people are necessary, it is right and proper to consider the circumstances as they apply to couples.
The minimum income guarantee for a couple is not twice the rate for a single person, but about one and a half times that rate. I shall give one example of that. In 2025, a husband has had a full working life, and his wife has had 20 years of caring for children, 10 of those years being devoted to children under six years of age. The man has earned £180 a week, at today's value, throughout his working life, and his wife, when she has worked, has earned £120, again in today's terms.
Under SERPS, the couple's pension would be £121.40 a week, nearly £5 more than the MIG. Under the state second pension, the couple's pension would be £150—15 years before they fall back on the MIG. Such factors must be taken into account. I have recently complained to the financial experts on The Guardian and The Observer, and will do so again to the experts on

The Sunday Telegraph, who have all advised that it is better not to be involved and to let the state have a ride on the MIG. That advice can give people the false impression that they do not need to provide for themselves.
What is the price of being on the MIG? First, people are limited with regard to the amount of savings that they can have. Those capital limits are being raised, and it is important to ask how many times they will change in the future, because otherwise people might take a risk that is not worth the candle. If a couple can be in SERPS or the second state pension, or a combination of the second state pension and a stakeholder pension, their income, generally speaking, will be way over the MIG. There will be no pressure on their savings, or any of the other factors that go with the MIG.
When journalists write on this subject and give examples about MIG, I wish that they would give the relevant figures for couples as well as for individuals. We shall do that when we compile the leaflets for stakeholder pensions, and the picture that is painted as a result will be entirely different simply because the MIG for a couple is nowhere near twice the rate for a single person.

Mr. Webb: I thank the Minister for responding seriously to the points raised in this section of the debate. It is extraordinary that the Conservative amendment outspends the Liberal Democrat one—it would cost the Government £8 billion, as opposed to our amendment's £3 billion. That must make the hon. Member for Havant (Mr. Willetts) feel a bit uncomfortable.
The Minister ended on an important point. It is true that a couple in which both partners are on full state second pension and basic pension, for example, will be clear of the MIG. In terms of pension planning, however, individuals cannot assume that they will be part of a couple when the time comes. Far too many women's pensions in the past have been built on the assumption that their husbands would provide, only for that relationship to break up. A lot of people are single at pension age, many of them never having thought that that would happen. That has to be taken into account.
The Minister said that new clause 10 contains an element of retrospection, and that the computers were not up to the task. When the decision is made about how much someone will get on retirement, the computers will have to know, in each year of SERPS, how much SERPS that person would be entitled to. We suggest that they disregard one of those historic pieces of information and use a current piece of information. A current year's entitlement should be substituted for an old year's entitlement. As, presumably, the data and the computers are better now, and given that the figures will have to be worked out anyway, I do not understand why the computers should be a barrier.
In the scheme of 50 years of pension reform, the scale of the improvement to the state second pension that we propose is reasonable and modest. We have sought to divide the House on a number of occasions, but we believe that the state second pension is a key aspect of the Bill. We believe that the state second pension is flawed because it will take so long to come in, and new clause 10 would address that in a measured and reasonable way.

Question put, That the clause be read a Second time:—

The House divided: Ayes 36, Noes 282

Division No. 137]
[9.36 pm


AYES


Allan, Richard
Heath, David (Somerton & Frome)


Ashdown, Rt Hon Paddy
Hughes, Simon (Southwark N)


Ballard, Jackie
Jones, Dr Lynne (Selly Oak)


Benn, Rt Hon Tony (Chesterfield)
Keetch, Paul


Brake, Tom
Kirkwood, Archy


Brand, Dr Peter
Llwyd, Elfyn


Breed, Colin
McDonnell, John



Maclennan, Rt Hon Robert


Burnett, John
 Moore, Michael


Burstow, Paul
Öpik, Lembit


Campbell, Rt Hon Menzies (NE Fife)
Rendel, David



Sanders, Adrian


Chidgey, David
Stunell, Andrew


Corbyn, Jeremy
Thomas, Simon (Ceredigion)


Cotter, Brian
Tonge, Dr Jenny


Davey, Edward (Kingston)
Tyler, Paul


Fearn, Ronnie
Webb, Steve


Foster, Don (Bath)



George, Andrew (St Ives)
Tellers for the Ayes:


Harris, Dr Evan
Mr. Bob Russell and


Harvey, Nick
Sir Robert Smith.




NOES


Abbott, Ms Diane
Clark, Dr Lynda (Edinburgh Pentlands)


Ainger, Nick



Ainsworth, Robert (Cov'try NE)
Clark, Paul (Gillingham)


Alexander, Douglas
Clarke, Charles (Norwich S)


Allen, Graham
Clarke, Eric (Midlothian)


Anderson, Donald (Swansea E)
Clarke, Tony (Northampton S)


Anderson, Janet (Rossendale)
Clelland, David


Armstrong, Rt Hon Ms Hilary
Clwyd, Ann


Ashton, Joe
Coaker, Vernon


Atherton, Ms Candy
Coffey, Ms Ann


Atkins, Charlotte
Cohen, Harry


Austin, John
Coleman, Iain


Banks, Tony
Colman, Tony


Barnes, Harry
Connarty, Michael


Barron, Kevin
Cook, Frank (Stockton N)


Bayley, Hugh
Cooper, Yvette


Beard, Nigel
Corbett, Robin


Beckett, Rt Hon Mrs Margaret
Cousins, Jim


Begg, Miss Anne
Crausby, David


Bell, Martin (Tatton)
Cryer, John (Hornchurch)


Benton, Joe
Cunningham, Rt Hon Dr Jack (Copeland)


Bermingham, Gerald



Berry, Roger
Cunningham, Jim (Cov'try S)


Betts, Clive
Dalyell, Tam


Blears, Ms Hazel
Darling, Rt Hon Alistair


Blizzard, Bob
Darvill, Keith


Boateng, Rt Hon Paul
Davey, Valerie (Bristol W)


Bradley, Keith (Withington)
Davidson, Ian


Bradley, Peter (The Wrekin)
Davies, Geraint (Croydon C)


Bradshaw, Ben
Dean, Mrs Janet


Brinton, Mrs Helen
Dismore, Andrew


Brown, Rt Hon Nick (Newcastle E)
Dobbin, Jim


Browne, Desmond
Donohoe, Brian H


Buck, Ms Karen
Doran, Frank


Burden, Richard
Dowd, Jim


Caborn, Rt Hon Richard
Eagle, Angela (Wallasey)


Campbell, Alan (Tynemouth)
Eagle, Maria (L'pool Garston)


Campbell, Ronnie (Blyth V)
Edwards, Huw


Campbell-Savours, Dale
Ennis, Jeff


Caplin, Ivor
Field, Rt Hon Frank


Casale, Roger
Fisher, Mark


Caton, Martin
Fitzsimons, Lorna


Cawsey, Ian
Flint, Caroline


Chapman, Ben (Wirral S)
Follett, Barbara


Clapham, Michael
Foster, Rt Hon Derek


Clark, Rt Hon Dr David (S Shields)
Foster, Michael Jabez (Hastings)





Foster, Michael J (Worcester)
McWilliam, John


Foulkes, George
Mahon, Mrs Alice


Galloway, George
Marsden, Gordon (Blackpool S)


Gardiner, Barry
Marsden, Paul (Shrewsbury)


Gerrard, Neil
Marshall, Jim (Leicester S)


Gilroy, Mrs Linda
Marshall-Andrews, Robert


Godman, Dr Norman A
Maxton, John


Goggins, Paul
Meacher, Rt Hon Michael


Golding, Mrs Llin
Michie, Bill (Shef'ld Heeley)


Gordon, Mrs Eileen
Miller, Andrew


Griffiths, Jane (Reading E)
Moffatt, Laura


Griffiths, Nigel (Edinburgh S)
Moonie, Dr Lewis


Grocott, Bruce
Morgan, Ms Julie (Cardiff N)


Grogan, John
Morley, Elliot


Hall, Mike (Weaver Vale)
Morris, Rt Hon Ms Estelle (B'ham Yardley)


Hamilton, Fabian (Leeds NE)



Harman, Rt Hon Ms Harriet
Mountford, Kali


Heal, Mrs Sylvia
Mullin, Chris


Healey, John
Murphy, Denis (Wansbeck)


Henderson, Doug (Newcastle N)
Murphy, Jim (Eastwood)


Henderson, Ivan (Harwich)
Murphy, Rt Hon Paul (Torfaen)


Heppell, John
Naysmith, Dr Doug


Hill, Keith
Norris, Dan


Hinchliffe, David
O'Brien, Mike (N Warks)


Hoon, Rt Hon Geoffrey
Olner, Bill


Hope, Phil
O'Neill, Martin


Hopkins, Kelvin
Osborne, Ms Sandra


Howarth, Alan (Newport E)
Palmer, Dr Nick


Howarth, George (Knowsley N)
Pearson, Ian


Howells, Dr Kim
Pendry, Tom


Hoyle, Lindsay
Perham, Ms Linda


Hughes, Kevin (Doncaster N)
Pickthall, Colin


Humble, Mrs Joan
Pike, Peter L


Hurst, Alan
Plaskitt, James


Hutton, John
Pollard, Kerry


Iddon, Dr Brian
Pond, Chris


Illsley, Eric
Pound, Stephen


Jackson, Ms Glenda (Hampstead)
Powell, Sir Raymond


Jackson, Helen (Hillsborough)
Prentice, Ms Bridget (Lewisham E)


Jamieson, David
Prentice, Gordon (Pendle)


Jenkins, Brian
Prescott, Rt Hon John


Johnson, Alan (Hull W & Hessle)
Prosser, Gwyn


Johnson, Miss Melanie (Welwyn Hatfield)
Purchase, Ken



Quin, Rt Hon Ms Joyce


Jones, Rt Hon Barry (Alyn)
Quinn, Lawrie


Jones, Helen (Warrington N)
Radice, Rt Hon Giles


Jones, Jon Owen (Cardiff C)
Raynsford, Nick


Jones, Martyn (Clwyd S)
Reed, Andrew (Loughborough)


Kaufman, Rt Hon Gerald
Reid, Rt Hon Dr John (Hamilton N)


Keeble, Ms Sally
Roche, Mrs Barbara


Keen, Alan (Feltham & Heston)
Rooker, Rt Hon Jeff


Kemp, Fraser
Rooney, Terry


Kennedy, Jane (Wavertree)
Ross, Ernie (Dundee W)


Khabra, Piara S
Rowlands, Ted


Kidney, David
Roy, Frank


Kilfoyle, Peter
Ruane, Chris


King, Andy (Rugby & Kenilworth)
Ruddock, Joan


King, Ms Oona (Bethnal Green)
Ryan, Ms Joan


Laxton, Bob
Salter, Martin


Lepper, David
Savidge, Malcolm


Leslie, Christopher
Sawford, Phil


Levitt, Tom
Sedgemore, Brian


Lewis, Terry (Worsley)
Sheerman, Barry


Liddell, Rt Hon Mrs Helen
Short, Rt Hon Clare


Linton, Martin
Simpson, Alan (Nottingham S)


Lock, David
Singh, Marsha


Love, Andrew
Skinner, Dennis


McAvoy, Thomas
Smith, Rt Hon Andrew (Oxford E)


McCabe, Steve
Smith, Angela (Basildon)


McDonagh, Siobhain
Smith, Jacqui (Redditch)


Macdonald, Calum
Smith, John (Glamorgan)


McFall, John
Smith, Llew (Blaenau Gwent)


McNulty, Tony
Snape, Peter


MacShane, Denis
Soley, Clive


Mactaggart, Fiona
Southworth, Ms Helen


McWalter, Tony
Spellar, John






Squire, Ms Rachel
Twigg, Derek (Halton)


Steinberg, Gerry
Twigg, Stephen (Enfield)


Stevenson, George
Walley, Ms Joan


Stewart, David (Inverness E)
Ward, Ms Claire


Stewart, Ian (Eccles)
Watts, David


Stinchcombe, Paul
White, Brian


Stoate, Dr Howard
Whitehead, Dr Alan


Stringer, Graham
Williams, Rt Hon Alan (Swansea W)


Stuart, Ms Gisela



Sutcliffe, Gerry
Williams, Alan W (E Carmarthen)


Taylor, Rt Hon Mrs Ann (Dewsbury)
Williams, Mrs Betty (Conwy)



Wills, Michael


Taylor, Ms Dari (Stockton S)
Winnick, David


Taylor, David (NW Leics)
Wood, Mike


Temple-Morris, Peter
Woodward, Shaun


Thomas, Gareth (Clwyd W)
Woolas, Phil


Thomas, Gareth R (Harrow W)
Worthington, Tony


Tipping, Paddy
Wright, Anthony D (Gt Yarmouth)


Touhig, Don
Wright, Dr Tony (Cannock)


Trickett, Jon
Wyatt, Derek


Truswell, Paul



Turner, Dennis (Wolverh'ton SE)
Tellers for the Noes:


Turner, Dr George (NW Norfolk)
Mr. Greg Pope and


Turner, Neil (Wigan)
Mrs. Anne McGuire.

Question accordingly negatived.

New Clause 11

Date of payment of benefit

'.—In section 5(1)(k) of the Social Security Administration Act 1992, at the end, there shall be inserted—
except that where the conditions of entitlement are satisfied, a retirement pension shall become payable from a date no later than the date on which the claimant reaches pensionable age.".'.— [Mr. Webb.]

Brought up, and read the First time.

Mr. Webb: I beg to move, That the clause be read a Second time.
The House will be relieved to hear that this will be a brief contribution, prompted by two cases of perceived injustice in the way the benefits system treats people who have just reached state pension age. People receive their first state pension on the Monday after they reach state pension age, even though they may have been 65 or 60, as the case may be, for up to six days. That is six sevenths of a week, and it can leave a person reaching state pension age short, to their way of thinking, by as much as £100.
I should like to draw attention to the cases of two people. The Minister will be familiar with the case of Mr. Maiden, constituent of my hon. Friend the Member for Edinburgh, West (Mr. Gorrie), who felt aggrieved by the fact that he missed out on several days' worth of pension. He took the Benefits Agency to a tribunal and won. An article in Choice magazine, from April 1999, says:
Ron was triumphant…although the Department of Social Security says his success doesn't set a precedent.
In other words, the tribunal decided that this man should have been paid his pension from when he was 65, not from the following Monday. However, the Department of Social Security decided that although the tribunal had found against it, it would not apply that rule to other people.
That case was brought to my attention by a constituent, Mr. Wells, who was 65 on a Tuesday and therefore lost six days' worth of pension. He says that although it is not

a huge sum, it is a matter of principle. He took his case to appeal and lost. I told him that I would bring the matter to the attention of the House with a view to rationalising the slightly odd situation where a person can have reached the qualifying age for the state pension but not be entitled to draw it for nearly a week thereafter.
I have written to the Minister on the issue previously, and the responses tend to say that the same is true of other benefits, so if the person was receiving another benefit before reaching state pension age, that would run on for the six days and there would be no loss; but of course that is not true of someone who is in employment immediately prior to reaching state pension age.
Thus the purpose of new clause 11 is to try to tidy up the legislation, to make it plain that entitlement starts when one reaches 60 or 65. It does not matter terribly that the payment may not be made until the next Monday; but the entitlement should date from the date of reaching state pension age. That seems only just and fair. I hope that the computers are not a barrier and that the Minister will accept the new clause.

Mr. Rooker: First, I make it clear that the way in which the pension is paid does not cheat pensioners. When I was elected to the House years ago, my constituents asked me similar questions. I received replies from Ministers and asked parliamentary questions, so perhaps this is a generational issue.
I wish to put several points on the record, and one is that we must be careful about the language we use. Two principles were set down in 1948 and they have remained the same since. First, retirement pension is paid weekly in advance, so I shall not return to the arguments about ACT and whether it should be paid four weekly in arrears. Secondly, it is paid in whole weeks, not in part weeks.
There is no sense in beating about the bush and, earlier today, I answered a question from the right hon. Member for Caernarfon (Mr. Wigley). The consequence of making the pension payable from someone's birth date is that, when the payment is no longer required because the pensioner has died, we would have to try to claim back the extra few days' payment. Frankly, we are not prepared to countenance that.
A pension is paid from the Monday following someone's 60th or 65th birthday and continues to be paid until the Monday after it is no longer required. In the sensitive period after someone has died, no attempt is made to claim back from the family any extra days paid.
I must disabuse hon. Members of their notions of the effects of ignoring the consequences of the new clause. The oncosts of part weeks would be £20 million a year. Because of the Public Accounts Committee and the requirements of accounting officers, we simply cannot write off £20 million.
Nobody loses out under the present system. Pensions are paid from Monday to Monday and they are paid in whole weeks. It has always been like that, and we do not propose to change the current system. I do not deny that, in due course, we want to pay pensioners by ACT, and the period covered by the payments will form part of the discussions in the next couple of years. Obviously we shall not pay four weeks in arrears; that is totally out of the question.
I do not want to offer any hope for change, because the consequence of paying pensions in part weeks is that we would have to claim back money after a pensioner was deceased. We are not prepared to countenance that. Frankly, I doubt that, if Members of the House were in my position, they would take a different view.

Mr. Webb: That was an interesting response, but not the one that I expected. I fear that I must report back to my constituent that he did not get his £100 when he was 65, but that his estate will receive it the week he dies. That seems to paraphrase the Minister's reply. I am not sure that my constituent will be happy with that, but I shall not try the House's patience any further. Given that I have received a different response from the ones that the Minister has given me in writing, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 18

CONCURRENCY OF PENSIONS, REBATES AND EXTRA MONIES

'.—(1) A person shall be able to hold both a stakeholder pension and an occupational pension concurrently and without financial penalty.
(2) Any rebates or extra monies that may be payable to a person, and which are greater for Stage 1 of the State Second Pension than for SERPS, shall be paid into a stakeholder pension.'.—[Mrs. Lait.]

Brought up, and read the First time.

Mrs. Lait: I beg to move, That the clause be read a Second time.

Madam Speaker: With this it will be convenient to discuss new clause 19—Use of rebates and extra monies—
'.—( ) Where rebates or extra monies are payable they shall be applied as follows—

(a) rebates shall be paid into Contracted Out Money Purchase Schemes; and
(b) extra monies shall be applied to Contracted Out Salary Related Schemes.'.

Mrs. Lait: I am afraid that these new clauses are rather technical, but I shall try to be as brief as possible.
New clause 18 relates to the principle of stakeholder pensions' concurrency with other pensions. The Government have recently suggested that they did not want concurrency, but that they would consider it for people on lower earnings. Why is it not a good idea for all people to use concurrency if they have the ability to pay and if it falls within the amount that they can use tax free?
The objection is that concurrency would mean a tax break for the rich. Many people, whatever their income, do not put enough money into pension schemes to give them a reasonable retirement income, and I suggest that if there is scope in the tax system for them to use up more money on pensions, it is, to say the least, shortsighted not to allow them to use stakeholder pensions to do so.
There are a number of other arguments for concurrency which I shall briefly deal with. The first is simplification. Concurrency would reduce the need for individuals to get advice on whether they should stay in or join an occupational scheme. The second argument concerns the complication of additional voluntary contributions. Stakeholder pensions could replace AVCs and freestanding AVCs because they would be better value for money.
Concurrency would also simplify regulatory issues, because there would not be the same need for stakeholder scheme providers to police members' employment arrangements. It seems odd to use the word "inertia" about pensions, because the last thing we want is for people to be inert when it comes to providing for themselves. However, there is an argument for making inertia work for, rather than against, pension provision. It would be easier for somebody to continue to pay into their stakeholder scheme when they joined an occupational scheme.
Another argument that has reared its head before is that there would be a potential for mis-selling if somebody opted out of a good occupational scheme because there was no concurrency. Concurrency is also useful for a flexible labour market and it would help existing schemes. There is plenty of scope for people to take up concurrent stakeholder pensions, because the average private sector employee in an occupational scheme contributes 4.7 per cent. of earnings to that scheme, so there is plenty of room for a stakeholder pension on top.
The arguments against concurrency relate to revenue loss, but there will be future savings to the Government on means-tested benefits. People are not already using up all their legal entitlement to pension contributions, and as we work on the basis of people paying tax as they get money out of their pension scheme, more tax will be paid in the longer term, because we will have better-off pensioners.
There are strong arguments for concurrency, and it has been recommended by bodies as disparate as the TUC, the Engineering Employers Federation and the National Association of Pension Funds. I urge the Government to reconsider concurrency on the basic policy principle of ensuring that as many people as possible take up as much of their pension entitlement as they can.
The second part of new clause 18 deals with rebates, and it, too, aims to encourage people to make better provision for themselves. There may be rebates in excess of those for SERPS which could be paid into a stakeholder pension. They would be small sums, but a stakeholder pension is designed for such sums. That would be a sensible way to enable people to use their allowances and, with concurrency, would help people to make pension provision. It would also be a useful pensions vehicle for large numbers of employees.
New clause 19 deals with where the line is drawn between the use of rebates and the use of top-ups to offset the impact of the state second pension. The proposed dividing line is drawn between occupational and personal pensions. That would sacrifice the level playing field between different sorts of pension—personal, occupational and stakeholder—but during the consultation process, the Government found that maintaining the level playing field would impose excessive administrative burdens and complexity.

Orders of the Day — BUSINESS OF THE HOUSE

It being Ten o'clock, the debate stood adjourned.

Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business),
That at this day's sitting, the Child Support, Pensions and Social Security Bill may be proceeded with, though opposed, until any hour.—[Mr. Kevin Hughes.]

Question agreed to.

As amended in the Standing Committee, again considered.

Question again proposed, That the clause be read a Second time.

Mrs. Lait: Our concern focuses on where the Government have chosen to draw the line. The issue was brought to our attention by the Association of British Insurers: it made its concerns clear to the Government, but they have not yet responded.
We suggest that top-ups are preferable to deeper rebates for defined benefit schemes, given the problems of getting the benefits of those rebates to filter through to lower-paid scheme members. It is less clear why the rebate approach is not applied to occupational schemes that are money purchase or defined contribution schemes. We suggest that the line should be drawn, not between occupational and personal pensions, but between defined benefit and money purchase schemes. Personal pensions might appear superficially more attractive than occupational money purchase schemes because of the deeper rebates. In theory, the S2P top-up should take care of that, but it will be 40 years before anyone sees any more jam.
It is also possible that the current proposals will add to providers' costs. Many insurers have moved out of COSRS, which are contracted out, salary-related schemes, and focused instead on COMPS, which are contracted out money purchase schemes that can run off the same systems as personal pensions and are therefore far simpler to use. We suggest that the Government take another look at the whole issue of COMPS and COSRS to see whether the impact of the stakeholder and state second pension will lessen the attraction of saving for pensions.
We are most concerned about the issue of concurrency. I hope that the Minister of State will display a positive attitude toward changing his mind about concurrency. If he does not, we shall press the new clause to a Division.

Mr. Flight: I rise to add to the points made by my hon. Friend the Member for Beckenham (Mrs. Lait). If the Government want stakeholders to be successful, it is in their interests to permit concurrency. The pattern of employment as it is now developing appears to require concurrency for both money purchase and final salary schemes. There will be an accelerating trend of people moving in and out between permanent employment, subcontracting and self-employment. For such people, there is a high risk of being left with little bits of several deferred occupational defined benefit schemes, so it must be desirable for them to have an on-going stakeholder pension scheme to provide the bulk of their retirement income.
What has happened to LISAs—lifelong individual savings accounts? The danger is that many people, especially those who are not in regular employment, will be underprovided for; at best, they will find their way

into the second state pension scheme. However, the concept of a pension tax wrapper—analogous to the old personal equity plan tax wrapper and fairly similar to the individual savings account tax wrapper, whereby everyone can save for their pension, choose the unit trust in which they want to invest, and so on—is a necessary ingredient of the stakeholder system if it is to attract the desired membership.
About 2.8 million of those targeted for the Government's stakeholder pensions are in occupational schemes. The House does not want occupational schemes to be undermined by stakeholder schemes, and it can be argued that concurrence lessens the incentive for businesses with occupational schemes to replace them with stakeholder schemes.
On new clause 19, I echo the point that there is little logic in having completely different regulations for occupational money purchase schemes and personal pension money purchase schemes. Both types of scheme are in essence a pot of money that attaches to the individual. Many complications are caused by the different regulations and many companies are gradually ending their final salary schemes and moving to money purchase schemes. They are tending to move towards group personal pension schemes because they are more flexible. Surely the time has come to put the regulations together. As I have said, we are talking basically about one product.

Mr. Leigh: I have one simple question for the Minister, which I hope I can ask in a couple of minutes. What will happen when stakeholder pensions are made compulsory? I know that the Government would deny that it is currently their intention to make such pensions compulsory, but it is a generally accepted opinion in the industry, and in other circles, that were the Government to win the next general election, one of their early steps would be to make them compulsory.
Incentives are built into the minimum income guarantee system not to save and not to provide for one's pension. The more an individual saves and provides for his pension, the more he falls out of means-tested benefits. There will be so many people tempted for these reasons not to take out a stakeholder pension that it will not make sense from the Government's point of view to make such a pension compulsory. Other systems that have brought in stakeholder-type pensions have made them compulsory.
If such pensions are made compulsory, what will happen? Will people be forced to take the product? Will they, because the Government are opposed to concurrency, be denied the opportunity to take up an occupational pension? Of course not. I can foresee many difficulties unless the Government make it clear that people will have the choice. What is wrong with choice? The Government are right to insist that people should be encouraged to make some provision for their old age, but they should not be denying people choice when it comes to making that provision.

Mr. Rooker: The hon. Member for Arundel and South Downs (Mr. Flight) made a very important point. Later this year, the Government will embark on their generic advertising of the concept of stakeholder pensions. Providers will be doing their bit for the individual product. We will have to ensure that our advertising does not


undermine occupational pensions—we are conscious of that. Mistakes could be made by a slip of a word, for example. I can give the hon. Gentleman that commitment. He raised the matter as an aside but he has made an important point.
We are now getting to technical considerations, and as someone from my humble origins I make no apology for sticking to my speaking notes. We discussed these matters in Committee. In responding to some hon. Members' questions, I must make it clear that the Government have not announced their final conclusions about concurrency. We have stated that clearly. Discussions are still taking place. If it were an easy matter to resolve or if we were ideologically opposed to concurrency and were having none of it, we would have said so by now. However, that is not our position. I hope that hon. Members will accept that sincere response, which I cannot go beyond.
The two new clauses are an attempt to introduce concurrency—to permit individuals to contribute simultaneously to a personal pension and an occupational pension scheme. A stakeholder pension is a personal pension. Secondly, they provide for members of occupational schemes on low and moderate earnings to get all the extra help that the state second pension brings entirely by way of enhanced national insurance rebates.
I shall deal first with the concurrency issue. We have already announced that we will permit concurrent membership of money purchase arrangements. An individual will be able to contribute, within existing limits, to both an employer-sponsored money purchase scheme and a stakeholder pension arrangement, if he or she so wishes.
I am in favour of everyone getting funded to the maximum. People should get as much money as they can from the Treasury to put towards their pension. I make no apology for saying that. It must be the best advice that any Member of Parliament or Minister can give our fellow citizens. There is a system designed to benefit them by enabling them to put money aside—not for a rainy day, but for their pension. Some people take full advantage of the system. Why do not others do so? They should get the maximum benefit in tax relief. If they can make the arrangements, and if they have the wherewithal, people should get funded up to the hilt.
However, there is always the problem of people going over the limit, by accident or as an avoidance measure. The Revenue is concerned about that. As has been said by hon. Members more versed in finance than I am, the Revenue is aware of the difficulties and will take a hard look at changes that may have an unintended effect.
The key issue now centres on concurrent membership of a defined contribution arrangement and defined benefit scheme. We have made it clear that we need to address the issue of high earners. Is it right to allow those who are already contributing up to the maximum limits in their occupational scheme to obtain further valuable tax relief on contributions of up to £3,600 a year to a concurrently held stakeholder scheme?
We do not believe that allowing such a concession would represent a wise or fair use of taxpayers' money. That is what it amounts to: the tax relief is the taxpayers'—the Treasury's—contribution to a person's pension. I say that

people should take advantage of all they can get up to the limit and within the rules, but I see no justification for spending taxpayers' money to go above that.
I am advised that the more substantive part of the new clause bears a resemblance to an option put forward by the pensions industry in the very early stages of the consultation exercise on the future contracting-out regime. I can do no better than to quote the response of the Association of British Insurers to the consultation paper:
We accept that the issues of practicality raised by this proposal would be a significant barrier to successful implementation, both for the Government and for the majority of pension providers. We have therefore concluded that this approach should not be pursued at this time.
It may be helpful to hon. Members if I work through the issues of practicality to which the ABI refers. The new clause as drafted provides for low and moderate earners in contracted-out schemes to have the extra help that would be provided by the state second pension delivered entirely in rebate form and paid directly into a stakeholder pension arrangement. The rebate for low earners would be based on £9,500 and an accrual rate of 40 per cent., and moderate earners would have their rebate based on actual earnings and an accrual rate of 10 per cent. As all the help comes via the rebate, no state scheme top-up would be payable.
Before I turn directly to the practical limitations, I shall say a word about the additional up-front costs arising from that approach. As hon. Members know, we are already putting in an additional £400 million in extra rebates from the outset of the reforms. This figure will rise to some £4.5 billion in 2010. The proposal in the new clause would add to that almost £500 million more in the first year, and well over £1 billion in the second. We must consider whether that is a proper use of taxpayers' money. When we consider the practical application of the proposal, the answer must be no.
Moving on to the operational implications of the proposal, the first point to make is that every employer running a contracted-out occupational scheme would have to ensure that a stakeholder pension arrangement would be available for each member of his work force on low or moderate earnings. At present there are approximately 11,000 contracted-out occupational schemes. All of them would have to submit a stakeholder pension scheme application form to the Inland Revenue if they were also to set up an employer-sponsored stakeholder scheme.
10.15 pm
Employers who run contracted-out occupational money purchase schemes would no doubt find the suggestion that they should open a separate stakeholder scheme a little odd. It could have the effect of forcing all the schemes to switch to stakeholder status or obliging the employer to run two money purchase arrangements. Both mean more administrative work for the employer. Alternatively, employers could simply facilitate access to a stakeholder scheme but they would be responsible for ensuring that their employee had such a scheme. That proposal is part of the access arrangements in the Bill.
Next, all individuals who want a stakeholder account would also need to submit a form to the Revenue. That is necessary to ensure that they receive the rebate due. For a money purchase scheme, delivering the extra rebate would be fairly straightforward. It would simply be paid


at the end of the tax year in the same way as existing money purchase rebates. However, the volumes could be enormous and cause the Revenue all sorts of difficulties. The method is far more complicated for final salary schemes. Part of the rebate would be delivered through a reduction in national insurance contributions, as happens now, and part would be paid into a stakeholder account at the end of the year.
We would need to devise a system that picked up both methods of delivery. That would require employers to provide end-of-year information differently from the way in which they currently provide it. The approach would require more and more administration. It is simply not a runner. However, I say that with the caveat that I mentioned at the beginning: we have not made our final decisions.
We are looking for a positive rather than a negative method of tackling the matter. We do not start from the ideological position that we do not want anyone to have any concurrency, whatever their earnings. I cannot go beyond that. However, if hon. Members are still awake, I have given a big enough hint that we are looking for a positive way of dealing with a difficult problem, to enable people to take up their rights to be fully funded and to get as much money out of the Treasury as possible.

Mrs. Lait: I am much encouraged to hear that the Government want everybody to take advantage of concurrency. We want to do everything possible to encourage them to do that. We acknowledge that the drafting of the new clause may not be perfect. However, the Minister is free to use Government facilities to redraft the amendments. To encourage him to do as much as possible for concurrency, I shall press the new clause to a vote.

Question put, That the clause be read a Second time:—

The House divided: Ayes 151, Noes 283.

Division No. 138]
[10.17 pm


AYES


Ainsworth, Peter (E Surrey)
Chidgey, David


Allan, Richard
Chope, Christopher


Amess, David
Clappison, James


Ancram, Rt Hon Michael
Clarke, Rt Hon Kenneth (Rushcliffe)


Arbuthnot, Rt Hon James



Ashdown, Rt Hon Paddy
Clifton-Brown, Geoffrey


Atkinson, Peter (Hexham)
Collins, Tim


Baldry, Tony
Cotter, Brian


Ballard, Jackie
Cran, James


Beith, Rt Hon A J
Davey, Edward (Kingston)


Bercow, John
Davies, Quentin (Grantham)


Beresford, Sir Paul
Davis, Rt Hon David (Haltemprice)


Body, Sir Richard
Day, Stephen


Boswell, Tim
Dorrell, Rt Hon Stephen


Bottomley, Rt Hon Mrs Virginia
Duncan, Alan


Brady, Graham
Duncan Smith, Iain


Brake, Tom
Evans, Nigel


Brand, Dr Peter
Faber, David


Brazier, Julian
Fabricant, Michael


Breed, Colin
Fallon, Michael


Brooke, Rt Hon Peter
Fearn, Ronnie


Browning, Mrs Angela
Flight, Howard


Bruce, Ian (S Dorset)
Forth, Rt Hon Eric


Burnett, John
Foster, Don (Bath)


Burstow, Paul
Fowler, Rt Hon Sir Norman


Butterfill, John
Fox, Dr Liam


Campbell, Rt Hon Menzies (NE Fife)
Fraser, Christopher



Gale, Roger





Garnier, Edward
Ottaway, Richard


George, Andrew (St Ives)
Page, Richard


Gibb, Nick
Paice, James


Gillan, Mrs Cheryl
Pickles, Eric


Gray, James
Portillo, Rt Hon Michael


Green, Damian
Prior, David


Greenway, John
Redwood, Rt Hon John


Grieve, Dominic
Rendel, David


Gummer, Rt Hon John
Robathan, Andrew


Hamilton, Rt Hon Sir Archie
Robertson, Laurence


Hammond, Philip
Roe, Mrs Marion (Broxbourne)


Harris, Dr Evan
Ruffley, David


Harvey, Nick
Russell, Bob (Colchester)


Hayes, John
St Aubyn, Nick


Heald, Oliver
Sanders, Adrian


Heath, David (Somerton & Frome)
Shephard, Rt Hon Mrs Gillian


Heathcoat-Amory, Rt Hon David
Simpson, Keith (Mid-Norfolk)



Smith, Sir Robert (W Ab'd'ns)


Hogg, Rt Hon Douglas
Soames, Nicholas


Horam, John
Spicer, Sir Michael


Hughes, Simon (Southwark N)
Spring, Richard


Hunter, Andrew
Stanley, Rt Hon Sir John


Jenkin, Bernard
Steen, Anthony


Keetch, Paul
Streeter, Gary


Key, Robert
Stunell, Andrew


King, Rt Hon Tom (Bridgwater)
Swayne, Desmond


Kirkbride, Miss Julie
Syms, Robert


Kirkwood, Archy
Tapsell, Sir Peter


Laing, Mrs Eleanor
Taylor, Ian (Esher & Walton)


Lait, Mrs Jacqui
Taylor, John M (Solihull)


Lansley, Andrew
Taylor, Matthew (Truro)


Leigh, Edward
Tonge, Dr Jenny


Letwin, Oliver
Trend, Michael


Lewis, Dr Julian (New Forest E)
Tyler, Paul


Lidington, David
Tyrie, Andrew


Lilley, Rt Hon Peter
Viggers, Peter


Livsey, Richard
Walter, Robert


Lloyd, Rt Hon Sir Peter (Fareham)
Wardle, Charles


Loughton, Tim
Waterson, Nigel


Lyell, Rt Hon Sir Nicholas
Webb, Steve


MacKay, Rt Hon Andrew
Whitney, Sir Raymond


Maclennan, Rt Hon Robert
Whittingdale, John


McLoughlin, Patrick
Willetts, David


Malins, Humfrey
Winterton, Mrs Ann (Congleton)


Mates, Michael
Winterton, Nicholas (Macclesfield)


Moore, Michael
Yeo, Tim


Moss, Malcolm
Young, Rt Hon Sir George


Nicholls, Patrick



Norman, Archie
Tellers for the Ayes:


O'Brien, Stephen (Eddisbury)
Mr. John Randall and


Öpik, Lembit
Mr. Peter Luff.




NOES


Abbott, Ms Diane
Betts, Clive


Ainger, Nick
Blears, Ms Hazel


Alexander, Douglas
Blizzard, Bob


Allen, Graham
Boateng, Rt Hon Paul


Anderson, Donald (Swansea E)
Bradley, Keith (Withington)


Anderson, Janet (Rossendale)
Bradley, Peter (The Wrekin)


Armstrong, Rt Hon Ms Hilary
Bradshaw, Ben


Ashton, Joe
Brinton, Mrs Helen


Atherton, Ms Candy
Brown, Rt Hon Nick (Newcastle E)


Atkins, Charlotte
Browne, Desmond


Austin, John
Buck, Ms Karen


Banks, Tony
Burden, Richard


Barnes, Harry
Caborn, Rt Hon Richard


Barron, Kevin
Campbell, Alan (Tynemouth)


Bayley, Hugh
Campbell, Ronnie (Blyth V)


Beard, Nigel
Campbell-Savours, Dale


Beckett, Rt Hon Mrs Margaret
Caplin, Ivor


Begg, Miss Anne
Casale, Roger


Bell, Martin (Tatton)
Caton, Martin


Benn, Rt Hon Tony (Chesterfield)
Cawsey, Ian


Benton, Joe
Chapman, Ben (Wirral S)


Bermingham, Gerald
Clapham, Michael


Berry, Roger
Clark, Rt Hon Dr David (S Shields)






Clark, Dr Lynda (Edinburgh Pentlands)
Hughes, Kevin (Doncaster N)



Humble, Mrs Joan


Clark, Paul (Gillingham)
Hurst, Alan


Clarke, Charles (Norwich S)
Hutton, John


Clarke, Eric (Midlothian)
Iddon, Dr Brian


Clarke, Tony (Northampton S)
Illsley, Eric


Clelland, David
Jackson, Ms Glenda (Hampstead)


Clwyd, Ann
Jackson, Helen (Hillsborough)


Coaker, Vernon
Jamieson, David


Coffey, Ms Ann
Jenkins, Brian


Cohen, Harry
Johnson, Alan (Hull W & Hessle)


Coleman, Iain
Johnson, Miss Melanie (Welwyn Hatfield)


Colman, Tony



Connarty, Michael
Jones, Rt Hon Barry (Alyn)


Cook, Frank (Stockton N)
Jones, Helen (Warrington N)


Cooper, Yvette
Jones, Jon Owen (Cardiff C)


Corbett, Robin
Jones, Dr Lynne (Selly Oak)


Corbyn, Jeremy
Jones, Martyn (Clwyd S)


Cousins, Jim
Kaufman, Rt Hon Gerald


Crausby, David
Keeble, Ms Sally


Cryer, John (Hornchurch)
Keen, Alan (Feltham & Heston)


Cunningham, Rt Hon Dr Jack (Copeland)
Kemp, Fraser



Kennedy, Jane (Wavertree)


Cunningham, Jim (Cov'try S)
Khabra, Piara S


Dalyell, Tam
Kidney, David


Darling, Rt Hon Alistair
Kilfoyle, Peter


Darvill, Keith
King, Andy (Rugby & Kenilworth)


Davey, Valerie (Bristol W)
King, Ms Oona (Bethnal Green)


Davidson, Ian
Laxton, Bob


Davies, Geraint (Croydon C)
Lepper, David


Dean, Mrs Janet
Leslie, Christopher


Dismore, Andrew
Levitt, Tom


Dobbin, Jim
Lewis, Terry (Worsley)


Donohoe, Brian H
Liddell, Rt Hon Mrs Helen


Doran, Frank
Linton, Martin


Eagle, Angela (Wallasey)
Lock, David


Eagle, Maria (L'pool Garston)
Love, Andrew


Edwards, Huw
McAvoy, Thomas


Ennis, Jeff
McCabe, Steve


Reid, Rt Hon Frank
McDonagh, Siobhain


Fisher, Mark
Macdonald, Calum


fitzsimons, Lorna
McDonnell, John


Flint, Caroline
McFall, John


Follett, Barbara
McGuire, Mrs Anne


Foster, Rt Hon Derek
McNulty, Tony


Foster, Michael Jabez (Hastings)
MacShane, Denis


Foster, Michael J (Worcester)
Mactaggart, Fiona


Foulkes, George
McWalter, Tony


Gardiner, Barry
McWilliam, John


Gerrard, Neil
Mahon, Mrs Alice


Gilroy, Mrs Linda
Marsden, Gordon (Blackpool S)


Godman, Dr Norman A
Marsden, Paul (Shrewsbury)


Goggins, Paul
Marshall, Jim (Leicester S)


Golding, Mrs Llin
Marshall-Andrews, Robert


Gordon, Mrs Eileen
Maxton, John


Griffiths, Jane (Reading E)
Meacher, Rt Hon Michael


Griffiths, Nigel (Edinburgh S)
Michie, Bill (Shef'ld Heeley)


Grocott, Bruce
Miller, Andrew


Grogan, John
Moffatt, Laura


Hall, Mike (Weaver Vale)
Moonie, Dr Lewis


Hamilton, Fabian (Leeds NE)
Morgan, Ms Julie (Cardiff N)


Harman, Rt Hon Ms Harriet
Morley, Elliot


Heal, Mrs Sylvia
Morris, Rt Hon Ms Estelle (B'ham Yardley)


Healey, John



Henderson, Doug (Newcastle N)
Mountford, Kali


Henderson, Ivan (Harwich)
Mullin, Chris


Heppell, John
Murphy, Denis (Wansbeck)


Hill, Keith
Murphy, Jim (Eastwood)


Hinchliffe, David
Murphy, Rt Hon Paul (Torfaen)


Hoon, Rt Hon Geoffrey
Naysmith, Dr Doug


Hope, Phil
Norris, Dan


Hopkins, Kelvin
O'Brien, Mike (N Warks)


Howarth, Alan (Newport E)
Olner, Bill


Howarth, George (Knowsley N)
O'Neill, Martin


Howells, Dr Kim
Osborne, Ms Sandra


Hoyle, Lindsay
Palmer, Dr Nick





Pearson, Ian
Squire, Ms Rachel


Pendry, Tom
Steinberg, Gerry


Perham, Ms Linda
Stevenson, George


Pickthall, Colin
Stewart, David (Inverness E)


Pike, Peter L
Stewart, Ian (Eccles)


Plaskitt, James
Stinchcombe, Paul


Pollard, Kerry
Stoate, Dr Howard


Pond, Chris
Stringer, Graham


Pope, Greg
Stuart, Ms Gisela


Pound, Stephen
Sutcliffe, Gerry


Prentice, Ms Bridget (Lewisham E)
Taylor, Rt Hon Mrs Ann (Dewsbury)


Prentice, Gordon (Pendle)



Prescott, Rt Hon John
Taylor, Ms Dari (Stockton S)


Prosser, Gwyn
Taylor, David (NW Leics)


Purchase, Ken
Temple-Morris, Peter


Quin, Rt Hon Ms Joyce
Thomas, Gareth (Clwyd W)


Quinn, Lawrie
Thomas, Gareth R (Harrow W)


Radice, Rt Hon Giles
Tipping, Paddy


Raynsford, Nick
Touhig, Don


Reid, Rt Hon Dr John (Hamilton N)
Trickett, Jon


Roche, Mrs Barbara
Truswell, Paul


Rooker, Rt Hon Jeff
Turner, Dennis (Wolverh'ton SE)



Turner, Dr George (NW Norfolk)


Rooney, Terry
Turner, Neil (Wigan)


Ross, Ernie (Dundee W)
Twigg, Derek (Halton)


Rowlands, Ted
Twigg, Stephen (Enfield)


Roy, Frank
Walley, Ms Joan


Ruane, Chris
Ward, Ms Claire


Ruddock, Joan
Watts, David


Ryan, Ms Joan
White, Brian


Salter, Martin
Whitehead, Dr Alan


Savidge, Malcolm
Williams, Rt Hon Alan (Swansea W)


Sawford, Phil



Sedgemore, Brian
Williams, Alan W (E Carmarthen)


Sheerman, Barry
Williams, Mrs Betty (Conwy)


Short, Rt Hon Clare
Wills, Michael


Simpson, Alan (Nottingham S)
Winnick, David


Singh, Marsha
Wood, Mike


Skinner, Dennis
Woodward, Shaun


Smith, Rt Hon Andrew (Oxford E)
Woolas, Phil


Smith, Angela (Basildon)
Worthington, Tony


Smith, Jacqui (Redditch)
Wright, Anthony D (Gt Yarmouth)


Smith, John (Glamorgan)
Wright, Dr Tony (Cannock)


Smith, Llew (Blaenau Gwent)
Wyatt, Derek


Snape, Peter



Soley, Clive
Tellers for the Noes:


Southworth, Ms Helen
Mr. Jim Dowd and


Spellar, John
Mr. Robert Ainsworth.

Question accordingly negatived.

New Clause 36

Annual increase in basic retirement pension

'.—The Secretary of State shall each year increase the basic retirement pension by not less than an amount equivalent to—

(a) the percentage increase in the general level of earnings during the preceding year; or
(b) the percentage increase in the retail prices index during the preceding year,
whichever is the greater.'.—[Mr. McDonnell.]

Brought up, and read the First time.

Motion made, and Question put, That the clause be read a Second time:—

The House divided: Ayes 75, Noes 240.

Division No. 139]
[10.31 pm


AYES


Abbott, Ms Diane
Barnes, Harry


Allan, Richard
Beith, Rt Hon A J


Ashdown, Rt Hon Paddy
Bell, Martin (Tatton)


Ballard, Jackie
Benn, Rt Hon Tony (Chesterfield)






Brake, Tom
Kirkwood, Archy


Brand, Dr Peter
Lewis, Terry (Worsley)


Breed, Colin
Livsey, Richard


Burnett, John
Llwyd, Elfyn


Burstow, Paul
McDonnell, John


Campbell, Rt Hon Menzies (NE Fife)
Maclennan, Rt Hon Robert



Mahon, Mrs Alice


Campbell, Ronnie (Blyth V)
Marshall-Andrews, Robert


Caton, Martin
Michie, Bill (Shef'ld Heeley)


Chidgey, David
Moore, Michael


Clapham, Michael
Morgan, Ms Julie (Cardiff N)


Clarke, Tony (Northampton S)
Öpik, Lembit


Clwyd, Ann
Pollard, Kerry


Connarty, Michael
Prentice, Gordon (Pendle)


Cook, Frank (Stockton N)
Rendel, David


Corbyn, Jeremy
Sawford, Phil


Cotter, Brian
Sedgemore, Brian


Cousins, Jim
Simpson, Alan (Nottingham S)


Cryer, John (Hornchunch)
Skinner, Dennis


Davey, Edward (Kingston)
Smith, Llew (Blaenau Gwent)


Davidson, Ian
Smith, Sir Robert (W Ab'd'ns)


Dobbin, Jim
Stevenson, George


Fearn, Ronnie
Stewart, Ian (Eccles)


Fisher, Mark
Stunell, Andrew


Foster, Don (Bath)
Taylor, Matthew (Truro)


George, Andrew (St Ives)
Thomas, Simon (Ceredigion)


Gerrard, Neil
Tonge, Dr Jenny


Godman, Dr Norman A
Tyler, Paul


Harris, Dr Evan
Walley, Ms Joan


Harvey, Nick
Webb, Steve


Heath, David (Somerton & Frome)
Williams, Mrs Betty (Conwy)


Hughes, Simon (Southwark N)
Wood, Mike


Hurst, Alan




Iddon, Dr Brian
Tellers for the Ayes:


Jones, Dr Lynne (Selly Oak)
Mr. Bob Russell and


Keetch, Paul
Mr. Kelvin Hopkins.




NOES


Ainger, Nick
Clark, Dr Lynda (Edinburgh Pentlands)


Alexander, Douglas



Allen, Graham
Clark, Paul (Gillingham)


Anderson, Donald (Swansea E)
Clarke, Charles (Norwich S)


Anderson, Janet (Rossendale)
Clarke, Eric (Midlothian)


Armstrong, Rt Hon Ms Hilary
Clelland, David


Ashton, Joe
Coaker, Vernon


Atherton, Ms Candy
Coffey, Ms Ann


Atkins, Charlotte
Cohen, Harry


Banks, Tony
Coleman, Iain


Barron, Kevin
Colman, Tony


Bayley, Hugh
Cooper, Yvette


Beard, Nigel
Corbett, Robin


Beckett, Rt Hon Mrs Margaret
Crausby, David


Begg, Miss Anne
Cunningham, Rt Hon Dr Jack (Copeland)


Benton, Joe



Bermingham, Gerald
Cunningham, Jim (Cov'try S)


Berry, Roger
Dalyell, Tam


Betts, Clive
Darling, Rt Hon Alistair


Blears, Ms Hazel
Darvill, Keith


Blizzard, Bob
Davey, Valerie (Bristol W)


Boateng, Rt Hon Paul
Davies, Geraint (Croydon C)


Bradley, Keith (Withington)
Dean, Mrs Janet


Bradley, Peter (The Wrekin)
Dismore, Andrew


Bradshaw, Ben
Donohoe, Brian H


Brinton, Mrs Helen
Doran, Frank


Brown, Rt Hon Nick (Newcastle E)
Eagle, Angela (Wallasey)


Browne, Desmond
Eagle, Maria (L'pool Garston)


Buck, Ms Karen
Edwards, Huw


Burden, Richard
Ennis, Jeff


Caborn, Rt Hon Richard
Field, Rt Hon Frank


Campbell, Alan (Tynemouth)
Fitzsimons, Lorna


Campbell-Savours, Dale
Flint, Caroline


Caplin, Ivor
Follett, Barbara


Casale, Roger
Foster, Rt Hon Derek


Cawsey, Ian
Foster, Michael Jabez (Hastings)


Chapman, Ben (Wirral S)
Foster, Michael J (Worcester)


Clark, Rt Hon Dr David (S Shields)
Foulkes, George





Gardiner, Barry
Moffatt, Laura


Gilroy, Mrs Linda
Moonie, Dr Lewis


Goggins, Paul
Morley, Elliot


Golding, Mrs Llin
Morris, Rt Hon Ms Estelle (B'ham Yardley)


Gordon, Mrs Eileen



Griffiths, Jane (Reading E)
Mountford, Kali


Griffiths, Nigel (Edinburgh S)
Mullin, Chris


Grocott, Bruce
Murphy, Denis (Wansbeck)


Grogan, John
Murphy, Jim (Eastwood)


Hall, Mike (Weaver Vale)
Murphy, Rt Hon Paul (Torfaen)


Hamilton, Fabian (Leeds NE)
Naysmith, Dr Doug


Harman, Rt Hon Ms Harriet
Norris, Dan


Heal, Mrs Sylvia
O'Brien, Mike (N Warks)


Healey, John
Olner, Bill


Henderson, Doug (Newcastle N)
O'Neill, Martin


Henderson, Ivan (Harwich)
Osborne, Ms Sandra


Heppell, John
Palmer, Dr Nick


Hill, Keith
Pearson, Ian


Hinchliffe, David
Pendry, Tom


Hoon, Rt Hon Geoffrey
Perham, Ms Linda


Hope, Phil
Pickthall, Colin


Howarth, Alan (Newport E)
Pike, Peter L


Howarth, George (Knowsley N)
Plaskitt, James


Howells, Dr Kim
Pond, Chris


Hoyle, Lindsay
Pope, Greg


Hughes, Kevin (Doncaster N)
Pound, Stephen


Humble, Mrs Joan
Prentice, Ms Bridget (Lewisham E)


Hutton, John
Prescott, Rt Hon John


Illsley, Eric
Prosser, Gwyn


Jackson, Ms Glenda (Hampstead)
Purchase, Ken


Jackson, Helen (Hillsborough)
Quin, Rt Hon Ms Joyce


Jamieson, David
Quinn, Lawrie


Jenkins, Brian
Radice, Rt Hon Giles


Johnson, Alan (Hull W & Hessle)
Raynsford, Nick


Johnson, Miss Melanie (Welwyn Hatfield)
Reid, Rt Hon Dr John (Hamilton N)



Roche, Mrs Barbara


Jones, Rt Hon Barry (Alyn)
Rooker, Rt Hon Jeff


Jones, Helen (Warrington N)
Rooney, Terry


Jones, Jon Owen (Cardiff C)
Ross, Ernie (Dundee W)


Jones, Martyn (Clwyd S)
Roy, Frank


Kaufman, Rt Hon Gerald
Ruane, Chris


Keeble, Ms Sally
Ruddock, Joan


Keen, Alan (Feltham & Heston)
Ryan, Ms Joan


Kemp, Fraser
Salter, Martin


Kennedy, Jane (Wavertree)
Savidge, Malcolm


Khabra, Piara S
Sheerman, Barry


Kidney, David
Short, Rt Hon Clare


King, Andy (Rugby & Kenilworth)
Singh, Marsha


King, Ms Oona (Bethnal Green)
Smith, Rt Hon Andrew (Oxford E)


Laxton, Bob
Smith, Angela (Basildon)


Lepper, David
Smith, Jacqui (Redditch)


Leslie, Christopher
Smith, John (Glamorgan)


Levitt, Tom
Snape, Peter


Liddell, Rt Hon Mrs Helen
Soley, Clive


Linton, Martin
Southworth, Ms Helen


Lock, David
Spellar, John


Love, Andrew
Squire, Ms Rachel


McAvoy, Thomas
Steinberg, Gerry


McCabe, Steve
Stewart, David (Inverness E)


McDonagh, Siobhain
Stinchcombe, Paul


Macdonald, Calum
Stoate, Dr Howard


McFall, John
Stringer, Graham


McGuire, Mrs Anne
Stuart, Ms Gisela


Mackinlay, Andrew
Sutcliffe, Gerry


McNulty, Tony
Taylor, Rt Hon Mrs Ann (Dewsbury)


MacShane, Denis



Mactaggart, Fiona
Taylor, Ms Dari (Stockton S)


McWalter, Tony
Taylor, David (NW Leics)


McWilliam, John
Temple-Morris, Peter


Marsden, Gordon (Blackpool S)
Thomas, Gareth (Clwyd W)


Marsden, Paul (Shrewsbury)
Thomas, Gareth R (Harrow W)


Marshall, Jim (Leicester S)
Tipping, Paddy


Maxton, John
Touhig, Don


Meacher, Rt Hon Michael
Trickett, Jon


Milburn, Rt Hon Alan
Turner, Dennis (Wolverh'ton SE)


Miller, Andrew
Turner, Dr George (NW Norfolk)






Turner, Neil (Wigan)
Winnick, David


Twigg, Derek (Halton)
Woodward, Shaun


Twigg, Stephen (Enfield)
Woolas, Phil


Ward, Ms Claire
Worthington, Tony


Watts, David
Wright, Anthony D (Gt Yarmouth)


White, Brian
Wright, Dr Tony (Cannock)


Whitehead, Dr Alan
Wyatt, Derek


Williams, Rt Hon Alan (Swansea W)




Tellers for the Noes:


Williams, Alan W (E Carmarthen)
Mr. Robert Ainsworth and


Wills, Michael
Mr. Jim Dowd.

Question accordingly negatived.

Clause 30

EARNINGS FROM WHICH PENSION DERIVED

Mr. Burstow: I beg to move amendment No. 12, in page 26, line 33, at end insert—
`and, for the purposes of calculating the pensioner's earnings factor under this subsection, in addition to any earnings, the pensioner will be credited with earnings equal to the lower earnings limit then in force in respect of each week in which invalid care allowance was payable or would have been payable but for the fact that under regulations the amount payable to him was reduced to nil because of his receipt of other benefits.'.

Mr. Deputy Speaker (Mr. Michael J. Martin): With this, it will be convenient to discuss the following amendments: No. 65, in page 26, line 46, leave out "six" and insert "twelve".
No. 68, in page 26, line 46, leave out "six" and insert "eleven".
No. 11, in clause 37, page 31, line 41, leave out from "he" to end of line 43 and insert—
'provides information regarding caring activity within a specified time which will be no less than six years following the year in which the qualifying caring activity took place.'.

Mr. Burstow: To get the state second pension, carers must receive or have an underlying entitlement to invalid care allowance for the full 52 weeks of the year. ICA rules mean that many carers lose entitlement for some weeks of the year. In the past, that meant that a week's benefit was lost. Under the state second pension, it means that a whole year's contribution will also be lost.
Carers can, in theory, get eight weeks of respite care under the current rules. Many place great value on that, but, as we all know from talking to carers in our constituencies, it can be very difficult for them to schedule their lives to avoid the linking rules that disqualify them from entitlement to invalid care allowance. They also have to bear in mind that if the person whom they are caring for is admitted to hospital unexpectedly, their eligibility and entitlement to invalid care allowance will also be jeopardised, thus risking the loss of a whole year's contribution to the state second pension.
Respite care is not the only area in which the rules could affect contributions to the state second pension. Many carers may value part-time work and see it as a further way of getting some respite and some connection to the wider community. However, particularly since the introduction of the minimum wage, it is difficult for people to earn below the £50 earnings rule limit. Even those who earn below that level can find that a Christmas

bonus or other bonuses push them above the earnings limit. That can result in them losing not just a week's invalid care allowance, but their entitlement to a whole year's contribution to the state second pension.
The Government say that the state second pension will be a valuable boost to carers' retirement incomes, but we believe that it is being built on a shaky foundation if invalid care allowance is used as the point of entry to entitlement. The amendments are designed to push the Government a little further to consider how to improve the situation for the approximately 400,000 carers in this country, many of whom have been caring for a very long time. When those people see the detail of how the state second pension will operate, they are less than enamoured of the scheme.
10.45 pm
Amendment No. 12 would enable carers to combine weeks of ICA with weeks of earnings over the lower earnings limit. It would help those who do not get ICA throughout the year and have periods when they are able to work but do not reach the lower earnings limit. For example, people receiving ICA for 40 weeks and earning £100 in each of the other 12 weeks would not get a year's credit for the state second pension, as their earnings would have been below the lower earnings limit and they did not get ICA for the whole year.
The Minister rightly said that the Government wanted to help the lowest earners in our country, but the way in which the scheme is constructed will make that impossible. We cannot help the real lowest earners unless we can fix the problem.
Amendment No. 11 concerns home responsibilities protection. The Government propose to change the qualification period, so that within three years of the entitlement to a benefit lapsing, if people have not made their declarations to the relevant authorities, they will lose the protection. At present, with the basic state pension, people can still claim after 15 or 20 years or more.
The Government are changing the requirement to allow only three years for both the basic state pension and the state second pension. We feel that that is not long enough to be fair, and that it would be better to align the change with other practice. For example, voluntary class 3 payments have to be paid before the sixth tax year after the one in which they were due and the time limit for claiming back overpaid tax or tax allowances is also six years.
The Government are concerned that people will not be able to remember the details of their periods of caring and eligibility for ICA. If that were the case, surely the same would apply with those two tax measures. We are arguing for consistency of approach in different legislation to the requirement for people to give notice of their entitlement.
We do not deny that the Government are making improvements for carers through the state second pension, but using eligibility for the invalid care allowance, which is very badly constructed, as the basis for entitlement to credits for the state second pension means that many carers will not get the credits that they deserve as a recognition for their many hours and years of caring.

Mrs. Lait: In the interests of brevity, I shall speak only to amendment No. 65. We discussed at length in


Committee credits for women at home with children, but the subject needs a further airing, as the Bill does not make as much provision for that as we had under SERPS. We think that it is prescriptive for the Government to say that credits will be available only to women with children under the age of six.
It is not often that the Conservative party joins those who voted just now on the basic state pension, but on this occasion we have tabled similar amendments: indeed, in Committee, we tabled an amendment to allow women to continue to be able to receive credits in respect of children under the age of 11.

Dr. Lynne Jones: I am pleased that the hon. Lady supports extending credits to carers of older children, but, last week, the hon. Member for Buckingham (Mr. Bercow) advocated that lone parents with children should be forced to work and should have their benefits cut if they did not go to work. Will she dissociate herself from those comments?

Mrs. Lait: All I would do is point out that it is the hon. Lady's Government who are cutting credits at the age of six, whereas we had arranged that women be credited for SERPS in respect of children up to the age 16, so I do not think that there is much of a point to be made out of that.
May we concentrate on the arguments for ensuring that women with children under the age 11 or 12 receive credits with regard to home responsibility payments? That may help us to move on speedily.
The reason why we have worked on the basis of 11 or 12 is that that is the age at which children break from primary school and go to secondary school. That is when their school hours tend to get longer and their mothers feel freer to go to work. It is interesting that labour market trends show that the bulk of women start working full-time when their children are aged 11-plus.
One of the purposes of our amendment is to ensure that women who have career breaks have the best possible chance of building their pension. We want to help them and to ensure they have the choice of staying at home to look after children until they are at school full-time and are more independent. That is why we have tabled the amendment to extend credits to the age of 12.

Dr. Lynne Jones: Amendment No. 68 credits carers of school-age children up to the age of 11 for the state second pension. As I have established, the real purpose of the state second pension is more to fill the gap left by the failure to uprate the basic state pension in line with earnings than to replace SERPS. In judging the Bill's adequacy in respect of giving credits for non-earners, the appropriate yardstick should be the groups who are credited for the basic state pension.
A parent who receives child benefit is credited with home responsibilities protection, which reduces the years required to qualify for the basic state pension. The Bill requires that the child must be under six for the carer to qualify for state second pension carer credits, but, even after the children go to school, the demands placed on a carer, especially in a child's early years or where there are a number of young children in a family, often preclude a return to work. If work is possible, it is often part-time and on earnings that fall beneath the lower earnings threshold. Therefore, the carer would not automatically qualify for credits for the state second pension.
That is particularly the case for lone-parent families. It is relevant that some Conservative Members seem to be advocating that lone parents should return to work if they have children of school age.
The Government have patted themselves on the back for the extra help that they have given to carers to be credited into the state second pension. I hope that my hon. Friend the Minister, when she responds to the debate, will explain the logic of not including the carers of children of primary school age.

Angela Eagle: In considering the amendments, we must bear in mind the huge gains that the introduction of the second state pension will bring for carers and the low-paid. About 18 million people will gain from the provisions: 9.5 million will be moderate earners; 4.5 million will be low earners; 2 million will be disabled people; and 2 million will be carers.
For the first time ever, the Bill provides that carers without a work record will have access to an additional pension. If they have a lifetime of caring, the Bill will give them access, for the first time, to additional pension provision. With that in mind, I shall deal with the amendments in this group.
Amendment No. 11 would extend from three years to six the time within which caring activity must be reported to the Department in order to qualify for credits for the second state pension. Home responsibilities protection at present protects the basic pension provision of someone caring for a child or for a sick or disabled person. It is not a credit or benefit in its own right.
As my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) pointed out, the protection works by reducing the number of qualifying years needed for full basic pension. Therefore, a person still has to work for many years, and many carers do not qualify for the benefits of home responsibilities protection because of the structure of the old system. The hon. Member for Sutton and Cheam (Mr. Burstow) might have had the grace to recognise that the second state pension will be a hugely beneficial development for those people. The hon. Gentleman both nit-picked around the edge of the argument and raised some serious issues, but he might have pointed that out.
Many child benefit recipients get home responsibilities protection automatically. Others need to complete a form to notify the Department of periods of caring activity that qualify. That can be done at any time after the period of caring. Given that home responsibility protection began in 1978, we could theoretically be asking people to provide information up to 49 years after the period of caring in question.
As the new home responsibilities protection for the second state pension is worth so much more in benefit—it will be as if an extra £9,500 had been earned, so it will be a big earnings boost—it seems prudent to make the system more sensible. Accordingly, we are to ask people to report to us the years in which they were caring.
We believe that three years is a reasonable interval in which a person may report caring activity, but the amendment suggests six. It is important that we can be confident that notifications are given using correct information. We do not believe it reasonable to expect carers to remember the number of hours of caring that


they undertook during a period of time more than 20 years previously. We therefore consider record-keeping to be important.
In addition, our aim of ensuring that as many carers as possible benefit from the additional pension provision under the second state pension means that we are proposing to keep the limits tight. We have decided that three years is the optimum period. That means that people who care throughout 2003–04 will need to have notified the Department by 5 April 2007 that they were caring in that period. If carers want to provide the information at the end of a year of caring rather than three years later, they will be free to do so.
The provision will not be retrospective, so people who have been caring in 1999–2000 will be able to notify the Department at the point of retirement under the old system, for the purposes of protecting their basic pension entitlement. In order to ensure that the change is implemented smoothly, we will provide advanced warning for those who may be affected, especially existing carers. We intend to mount a publicity campaign to reach carers in advance of the introduction of the second state pension, and we hope to make many more pensioners aware of home responsibilities protection than are aware of it at present.
The Carers National Association has agreed to disseminate information to its members at the appropriate time. We will pursue that offer, to ensure that people know that they have to report.
A balance must be struck between allowing records to be checked and the bureaucracy of requiring mandatory reports at frequent intervals. We believe that three years strikes the right balance. Verification of information six years after the event would be more difficult, and would leave the scheme open to abuse.
11 pm
Amendment No. 12 is a variation on a theme that we discussed in Committee. Entitlement to the state second pension will be calculated on an annual basis, as is the case for SERPS. It would not be operationally feasible to move to a system that calculated entitlement on a weekly basis. As I explained, the second state pension is intended to help low earners through the low earners' boost, and carers through credits towards the second state pension. We believe that, in the interests of consistency, fairness and operational manageability, that is the right approach.
The amendment confuses the two. It would allow people who were entitled to invalid care allowance to top up an earnings factor that was otherwise below the lower earnings limit, so they could benefit from the low earners' boost, mixing and matching different gateways. That is a sure recipe for administrative complexity and anomaly. That approach would favour a particular group. It would not, for instance, benefit carers who do not claim invalid care allowance but who apply for home responsibilities protection instead, because it takes a year to accrue that. So we hope that the amendment will be withdrawn, or defeated if it is pressed to a Division.
Amendments Nos. 65 and 68, which show the co-operation between the Opposition and my hon. Friend the Member for Selly Oak, are interesting. We had an

interesting debate about these matters in Committee. Five or six Conservative Members spoke, each expressing a completely different opinion. Some wanted women at work, some wanted them at home and some could not quite decide where they should be. They really need to sort themselves out on this issue.
Almost 1.5 million women caring for young children will begin to build up entitlement to additional pension for the first time under the state second pension. It is designed to give most help to those who are least able to afford to make their own provision, which is why we are focusing on mothers of children below school age. We recognise that they have the fewest opportunities, as they are caring for younger children, to earn above the lower earnings limit. Many mothers of school-age children combine their caring duties with part-time work and could benefit from the state second pension's low earners' boost when they earn as little as £3,432 a year. [Interruption.] The hon. Member for Gainsborough (Mr. Leigh) may think it is boring, but it will enable women who work part-time on low pay to accrue additional pension, often for the first time, so that they can look forward to retiring on a reasonable income instead of on to means-tested benefits, as all too many do now. The old systems have not supported them, and an examination of income statistics and the number of women who manage to qualify through their own contributions for additional pension, and even the basic pension, will confirm that view.

Dr. Lynne Jones: My hon. Friend talks about part-time earners. As I mentioned, people who work for 16 hours a week on the minimum wage will still not achieve the level of income to which she refers. What about those carers?

Angela Eagle: My hon. Friend is right. The lower earnings limit implies between 17 and 18 hours a week. We hope that through the new deal, the new opportunities in the workplace and the support that the Budget has given to single parents and low earners, making work pay, many people will have the chance to improve the number of hours they work, reach the lower earnings limit and qualify for the low earnings boost.
Focusing help on those caring for children under school age matches the choices that most mothers make. Most mothers take career breaks or periods out of work when their children are very young; many go back to work as their children get older. In addition, 4.5 million low earners—70 per cent. of whom are women—will gain under the second state pension. My hon. Friend should celebrate that, and welcome it.
In view of that explanation, I urge the hon. Member for Sutton and Cheam to withdraw the amendment.

Mr. Burstow: We have heard that a category of people on low incomes and with patchy records of receipt of invalid care allowance will find all the gates shut when it comes to the state second pension. Consequently, those people will not receive the low-income boost that the Minister rightly trumpets.
The Minister suggested that I should be doing her job by trumpeting the state second pension outside the House. I should be happy to support a benefit that truly boosted the pensions of retired carers, but I have set out why that will not happen. The numbers that the Minister gave us will prove illusory unless the workings and eligibility criteria of the invalid care allowance are substantially


improved. The Minister said that she would do something about that, but I hope that the Government will do more. Simply telling us that something is not operationally possible is not acceptable to thousands of carers who expect more of the Government.
This issue clearly needs further consideration at future stages, and we shall return to it in another place. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 4

ADDITIONAL PENSION

Amendments made: No. 34, in page 93, line 23, leave out ", 48B(2) or 48BB(5)" and insert "or 48B(2)".

No. 35, in page 93, line 35, at end insert—
'(4A) For the purpose of applying sub-paragraph (1) above in the determination of the rate of any additional pension by virtue of section 48BB(5) above, in a case where the deceased spouse died under pensionable age, the divisor used for the purposes of sub-paragraph (1)(c) above shall be whichever is the smaller of the alternative numbers referred to below (instead of the number of relevant years).
(4B) The first alternative number is the number of tax years which begin after 5th April 1978 and end before the date when the deceased spouse dies.
(4C) The second alternative number is the number of tax years in the period—

(a) beginning with the tax year in which the deceased spouse attained the age of 16 or, if later, 1978–79; and
(b) ending immediately before the tax year in which the deceased spouse would have attained pensionable age if he had not died earlier.'.—[Mr. Rooker.]

Clause 33

REBATES

Amendments made: No. 28, in page 30, line 3, leave out—
'.under section 48A of that Act,'.

No. 29, in page 30, line 5, at end insert—
`, in accordance with section 48A below and Schedule 4A to the Social Security Contributions and Benefits Act 1992,"'.—[Mr. Rooker.]

Clause 36

MODIFICATION OF EARNINGS FACTORS

Amendments made: No. 30, in page 31, line 25, leave out "Pension Schemes Act 1993" and insert "1993 Act".

No. 31, in page 31, line 26, leave out—
`Social Security Contributions and Benefits Act 1992'

and insert "1992 Act".

No. 32, in page 31, line 30, leave out subsection (2) and insert—
'(2) Subsection (1) shall have effect—

(a) in relation to the application of section 44(5A) of the 1992 Act by virtue of sections 39C(1) and 48BB(5) of that Act;
(b) in relation to the application of section 44(5A) of the 1992 Act in the circumstances described in section 128(4) to (6) of the 1995 Act.

(3) In relation to the period—

(a) beginning with 6th April 2000, and
(b) ending with the day before the first regulations under section 48A(5) of the 1993 Act (as amended by subsection (1) above) come into force,
the Secretary of State shall be taken to have, and to have had, power to calculate and pay relevant pensions by reference to section 44(5) of the 1992 Act as modified by regulations under section 48A(5) of the 1993 Act.
(4) For the purposes of applying subsection (3) above—

(a) the substitution made by section 128(1) of the 1995 Act shall be ignored, and
(b) references in enactments to section 44(5A) of the 1992 Act shall (so far as necessary) be treated as references to section 44(5).

(5) The first regulations under section 48A(5) of the 1993 Act (as amended by subsection (1) above) may include provision in relation to—

(a) revising the calculation of a relevant pension;
(b) paying a relevant pension in accordance with a revised calculation.
(6) Relevant pensions are pensions which fall to be calculated—

(a) in the circumstances described in section 128(4) to (6) of the 1995 Act, and
(b) in relation to persons where, by virtue of section 48A(1) of the 1993 Act, section 44(6) of the 1992 Act has effect in any tax year as mentioned in section 48A(1) of the 1993 Act in relation to some but not all of a person's earnings.
(7) For the purposes of this section—

(a) the 1992 Act is the Social Security Contributions and Benefits Act 1992;
(b) the 1993 Act is the Pension Schemes Act 1993;
(c) the 1995 Act is the Pensions Act I995.'.[Mr. Rooker.]

New Clause 25

RESTRICTION ON INDEX-LINKING WHERE ANNUITY TIED TO INVESTMENTS

`.—(1) In section 51(2) of the Pensions Act 1995 (annual increases in rate of pension) for "Subject to section 52" there shall be substituted "Subject to sections 51A and 52".
(2) After section 51 of that Act there shall be inserted—
"Restriction on increase where annuity tied to investments
51A.—(1) No increase under section 51 is required to be made, at any time on or after the relevant date, of so much of any pension under a money purchase scheme as—

(a) is payable by way of an annuity the amount of which for any year after the first year of payment is determined (whether under the terms of the scheme or under the terms of the annuity contract in pursuance of which it is payable) by reference to fluctuations in the value of, or the return from, particular investments;
(b) does not represent benefits payable in respect of the protected rights of any member of the scheme; and
(c) satisfies such other conditions (if any) as may be prescribed.
(2) For the purposes of this section it shall be immaterial whether the annuity in question is payable out of the funds of the scheme in question or under an annuity contract entered into for the purposes of the scheme.


(3) In this section 'the relevant date' means the date appointed for the coming into force of section (Restriction on index-linking where annuity tied to investments) of the Child Support, Pensions and Social Security Act 2000." '.—[Mr. Rooker.]

Brought up, and read the First time.

Mr. Rooker: I beg to move, That the clause be read a Second time.
New clause 25 provides members of money purchase occupational pension schemes with a choice. They will be able to use the non-protected rights element of their accumulated pension fund, in respect of rights accrued from April 1997, to buy instead either an investment-based annuity or an index-linked annuity. Occupational pensions must be increased annually as follows: rights that accrue from 5 April 1988 in respect of guaranteed minimum pension and protected rights must be indexed by the retail prices index, capped at 3 per cent.; and all rights accrued in salary-related and money purchase schemes from 6 April 1997 must be indexed by the RPI, capped at 5 per cent. Protected rights in appropriate personal pensions are subject to the same level of indexation.
We consulted the pensions industry, employers and the public on whether it would be right to relax the current rules for money purchase pension schemes in order to allow schemes to offer investment-linked annuities to any member who might wish to choose that option as an alternative to a traditional index-linked annuity. Of course, the advantage of an investment-linked annuity is that it enables the annuitant to benefit from growth in a range of underlying investments after retirement, although that goes hand in hand with a risk of possible falls in pension income if investment performance is poor.
The principle of introducing greater flexibility for occupational scheme members was widely welcomed. Indeed, a number of annuity providers pointed out that investment-linked annuities have delivered better results in recent years than the traditional index-linked annuity. The new flexibility will apply equally to members of money purchase schemes, whether they buy an annuity or are provided with a pension by their scheme.
Protected rights are not covered by the new clause. As I said when I announced the results of the consultation exercise on 22 March, we intend to give further detailed consideration to issues that arise for protected rights before we decide whether to make any changes to the indexation rules that apply to them. We shall also give careful consideration to the comments that many respondents made on the wider question of the application of indexation requirements to occupational money purchase schemes.
I emphasise that the proposed change provides a genuine option for members of money purchase schemes. The alternative of buying a traditional index-linked annuity will remain available for those members who prefer the certainty of a specified annual rate of increase each year.
The new clause is quite narrow. I hope that it has the support of the House.

Mrs. Lait: We certainly welcome this relaxation of the annuity rules for people who have to retire with a compulsory annuity, but it is worth pointing out that it

has had to happen because annuities have been progressively less good value, and we are now dealing with a cohort of pensioners who are upset and angry about what a bad deal the current requirement of compulsory annuities is. I would like to encourage the Government to be slightly braver and to look at all the requirements about annuities for the sake of the aggrieved pensioners for whom they are tinkering around the edges, welcome though these changes are.
I would like the Government seriously to consider, first, whether annuities should be obligatory and, secondly, whether there is an argument for abolishing the 75-year rule for income drawdown. I should like to hear the Government's views on the proposal by the retirement income working party, in its document "Choices", that people should be obliged to take out a compulsory annuity that provides sufficient income merely to keep them off state benefits, and should then be allowed to manage the rest of their pension pot as they see fit. That seems to be the most sensible, logical and grown-up way of dealing with pensions.
On that note, I would welcome—

Mr. Quentin Davies: My hon. Friend has just said that the Government made this proposal only as a sop against the enormous, quite justified outcry from those people who are being cheated—being forced to take annuities at a yield scarcely above the gilt rate, although their capital is being extinguished thereby. Does she agree that this is a thoroughly inadequate, characteristically new Labour, sop? It is a thoroughly fraudulent public relations response.

Mr. Deputy Speaker: Order. Now that the hon. Gentleman has made his speech, perhaps I can say to the hon. Lady that we are going wide of the amendment before us.

Mrs. Lait: I completely agree with you, Mr. Deputy Speaker, which is why I was trying to bring the debate back to the small improvement that the Government have offered. Although I might thoroughly agree with my hon. Friend, I was trying to encourage the Government to help, rather than to beat them round the head, because sometimes it helps if you stroke them. Therefore, I hope very much that they will be stroked, and are prepared to consider much wider provision of better retirement income for pensioners.

Mr. John Butterfill: I want to support what my hon. Friend has said and to welcome the measure as far as it goes, but the sheer complexity of the measure that the Minister has just outlined shows how impossible it has become for those who are buying annuities and pensions even to understand what they are contracting for.
We are now in a position where any independent financial adviser who advised a prospective pensioner to buy a personal pension would be guilty of mis-selling. That is partly because the Government, and successive Governments, have laid on alternative forms of tax-advantageous investment. Recently, individual savings accounts were introduced. Before that, there were personal equity plans and tax-exempt special savings accounts. There are still venture capital trusts and enterprise investment schemes, all of which, from an investor's viewpoint, are better investments than personal pensions.
The situation for personal pensions will get worse. Because of the operation of the minimum funding requirement, the funds are not allowed to invest in such advantageous forms of investment. They are forced into gilts, so the value of pension funds will be diminished, which means that the yield on the annuities will be diminished. That is why the Government tabled the new clause, but it is a wholly inadequate response. We must put pension provision and pension saving on the same footing as the other forms of saving that the Government seek to encourage. As they do that, however, they are undermining the basis on which pension provision has been made in the past.

Mr. Flight: I welcome the new clause, but I wish to point out that there are two problems with investment-linked annuities. First, it is normally impossible to change manager. If someone is locked into what he considers to be a poor fund, he can do nothing about the manager of the equity-linked annuity.
Secondly, the tax rules are such that if the annuity performs extremely well, the investor cannot take the full gains. The smoothing rules require that the income taken from the equity-linked annuity makes provision for potentially bad years in the future. There have been many cases in which people have died and left behind undrawn income, which simply accrues to the benefit of the insurance company.
As far as I am aware, neither problem has been addressed by the Government's proposals. Therefore, I exhort them to get a move on and to consider the retirement income working party's report. It has addressed all the key concerns that the Treasury and the Inland Revenue have had about abolishing the obligation to buy an annuity. The debate has been going on for three years, and the Minister might even agree that the argument has been conclusively won by those who support the abolition of the requirement to buy an annuity and who want to move to something like the Canadian scheme. The requirement is particularly unjust for those approaching 75 and who find themselves locked into an annuity.

Mr. Field: I very much welcome the change that the Government are making, but I hope that they will listen to the comments that have been made from both sides of the House and that we can move to a position in which the taxpayer's interest is protected. Provided that people meet the requirement of not being on welfare when they already receive tax concessions to build up their pension entitlement, they should be free to manage their own funds over and above the level stipulated.

Mr. Rooker: I could get quite angry. However, given the time of night, I shall not do so. I do not think that we have received a big enough thank you for what we have done.

Mr. Field: I say a big thank you to my right hon. Friend.

Mr. Rooker: I expect that from Labour Members.
When I moved the new clause, I tried to hint at a serious issue that has not been addressed by it. The new clause is quite narrow and the issues that have been raised

are important. In due course, the Government will respond to the "Choices" report and I am very keen to get a positive response. The report raises some important issues. I do not think that it provides all the answers, but I doubt whether we shall ever find all the answers. However, we must find a way through the impasse.
The problem is partly a consequence of the very low rates of inflation that we currently enjoy. Some people are aggrieved, and we shall try to find a solution, perhaps based on the "Choices" report, which may provide a foundation for the answer. My Department is concerned to ensure that any proposed scheme guarantees that people do not fall back on the state and means-tested benefits, and the Revenue has its views. The Government can make a collective response and we will come forward with that as quickly as possible.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 32

JURISDICTION OF THE PENSIONS OMBUDSMAN

'.—(1) Section 146 of the Pension Schemes Act 1993 (functions of the Pensions Ombudsman) shall be amended as follows.
(2) In subsection (1), after paragraph (b) there shall be inserted—
"(ba) a complaint made to him by or on behalf of an independent trustee of a trust scheme who, in connection with any act or omission which is an act or omission either—

(i) of trustees of the scheme who are not independent trustees, or
(ii) of former trustees of the scheme who were not independent trustees,
alleges maladministration of the scheme,".
(3) In that subsection, for the words after sub-paragraph (ii) of paragraph (d) there shall be substituted—
"and in a case falling within sub-paragraph (ii) references in this Part to the scheme to which the reference relates are references to each of the schemes,
(e) any dispute not falling within paragraph (f) between different trustees of the same occupational pension scheme,
(f) any dispute, in relation to a time while section 22 of the Pensions Act 1995 (schemes subject to insolvency procedures) applies in relation to an occupational pension scheme, between an independent trustee of the scheme and either—
(i) trustees of the scheme who are not independent trustees, or
(ii) former trustees of the scheme who were not independent trustees, and
(g) any question relating, in the case of an occupational pension scheme with a sole trustee, to the carrying out of the functions of that trustee."
(4) After that subsection there shall be inserted—
"(1A) The Pensions Ombudsman shall not investigate or determine any dispute or question falling within subsection (1)(c) to (g) unless it is referred to him—

(a) in the case of a dispute falling within subsection (1)(c), by or on behalf of the actual or potential beneficiary who is a party to the dispute,
(b) in the case of a dispute falling within subsection (1)(d), by or on behalf of any of the parties to the dispute,
(c) in the case of a dispute falling within subsection (1)(e), by or on behalf of at least half the trustees of the scheme,


(d) in the case of a dispute falling within subsection (1)(1), by or on behalf of the independent trustee who is a party to the dispute,
(e) in the case of a question falling within subsection (1)(g), by or on behalf of the sole trustee.
(1B) For the purposes of this Part, any reference to or determination by the Pensions Ombudsman of a question falling within subsection (1)(g) shall be taken to be the reference or determination of a dispute."
(5) In subsection (3) (persons responsible for the management of the scheme to be the trustees and managers and employer), after "occupational pension scheme" there shall be inserted "or a personal pension scheme".
(6) For paragraph (a) of subsection (6) (exclusion of the Ombudsman's jurisdiction where court proceedings have been begun) there shall be substituted—
"(a) if, before the making of the complaint or the reference of the dispute—

(i) proceedings in respect of the matters which would be the subject of the investigation have been begun in any court or employment tribunal, and
(ii) those proceedings are proceedings which have not been discontinued or which have been discontinued on the basis of a settlement or compromise binding all the persons by or on whose behalf the complaint or reference is made;".
(7) In subsection (7) (persons who are actual or potential beneficiaries)—
(a) after paragraph (b) there shall be inserted—
"(ba) a person who is entitled to a pension credit as against the trustees or managers of the scheme;" and
(b) in sub—paragraph (i) of paragraph (c), for "paragraph (a) or (b)" there shall be substituted "paragraph (a), (b) or (ba)".
(8) In subsection (8) (interpretation) after the definition of "employer" there shall be inserted—
"'independent trustee', in relation to a scheme, means—

(a) a trustee of the scheme appointed under section 23(1)(b) of the Pensions Act 1995 (appointment of independent trustee by insolvency practitioner or official receiver),
(b) a person appointed under section 7(1) of that Act to replace a trustee falling within paragraph (a) or this paragraph;".
(9) In subsection (1)—

(a) for "complaints and disputes" there shall be substituted "matters";
(b) in paragraph (b), for the words from "is to" to the end of the paragraph there shall be substituted "are references to the other scheme referred to in that subparagraph"; and
(c) in paragraphs (c) and (d), the words "which arises", in each place where they occur, shall be omitted.
(10) Subsection (6) does not have effect in relation to proceedings begun before the day appointed under section 79 for the coming into force of this section.'.—[Mr. Rooker.]

Brought up, and read the First time.

Mr. Rooker: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: New clause 22—Transfer to Financial Services Ombudsman of functions of Pensions Ombudsman and OPRA—
'.—(1) There shall be transferred to the Financial Services Ombudsman all the functions and powers of the Pensions Ombudsman established under Part X of the Pension Schemes

Act 1993 (as amended by the Pensions Act 1995); and the functions and powers of the Occupational Pensions Regulatory Authority shall be similarly transferred.
(2) The Treasury may by order—

(a) provide for the transfer of any property, rights or liabilities held, enjoyed or incurred by any person in connection with functions transferred under this section;
(b) provide for the carrying on and completion by or under the authority of the Financial Services Ombudsman of any proceedings, investigations or other matters concerned, before the order takes effect, by or under the authority of the Pensions Ombudsman or Occupational Pensions Regulatory Authority;
(c) make any transitional, incidental or consequential provision which is necessary, or expedient as a result of the transfer of functions under this section;
(d) provide for the substitution of the Financial Services Ombudsman for the Pensions Ombudsman or Occupational Pensions Regulatory Authority in any instrument, contract or legal proceedings made or begun before the order takes effect.
(3) The Treasury may make regulations providing for—

(a) the transfer to the scheme operator of any staff previously employed in the service of the Pensions Ombudsman or Occupational Pensions Regulatory Authority;
(b) the terms on which any such transfer shall take place; and
(c) the terms on which the employment of any person previously employed in the service of the Pensions Ombudsman may be terminated.'.
Government amendment No. 84.

Mr. Rooker: New clause 32 will allow the pensions ombudsman to consider five new types of case, which I shall briefly describe. First, it allows independent trustees to take complaints or disputes with other trustees or former trustees of the same scheme to the pensions ombudsman. The independent trustees may discover that the actions of previous trustees were less than would have been expected. Currently, they would have to try to take the trustees to court, spending what may be limited scheme resources, or persuade a member to make a complaint to the pensions ombudsman on their behalf.
Secondly, there may be occasions when scheme rules are unclear on an issue. Trustees may have to go to court to obtain a ruling on the meaning, particularly when a scheme is winding up and the rules cannot be changed. The new clause will allow the trustees to ask the pensions ombudsman for clarification if at least half of the members of the trustee board agree to do so, with no cost to the scheme. Half or more of the trustees have to agree because we do not want to overturn the principle that the majority view of the trustees should prevail.
Thirdly, the new clause enables the pensions ombudsman to accept complaints about the employer in connection with personal pensions. Employers can have an increasing role to play in personal pensions, particularly in group personal pensions. Currently, a personal pension holder can complain about the actions of the trustees or administrators, but not those of the employer.
Fourthly, the new clause allows those who are concerned, for example, about the level of charges or the implementation of the pension share, to raise that with the pensions ombudsman. When a person has a pensions credit awarded in a pension-sharing case, they should be able to complain if it is not handled properly by the scheme.
Finally, a scheme member may raise an issue concerning their pension scheme with the wrong authority, such as an industrial tribunal, which in this instance can be considered a court. Currently, if they do so, even by mistake, the pensions ombudsman cannot later accept the case. The new clause ensures that he can accept the case if it has been referred to court and has been discontinued.
Amendment No. 84 makes consequential changes resulting from new clause 32.
The new clause fills gaps in the pensions ombudsman's jurisdiction. There is a range of issues that the pensions ombudsman can investigate, but there are some issues that he currently cannot investigate. There is no good reason why he should be prevented from doing so and it would be helpful to members and schemes if he could investigate those issues. We consulted on those measures in "Strengthening the Pensions Framework", the consultation document issued at the same time as the Green Paper. There was overwhelming support for them, and I commend the new clause to the House.
I turn now to new clause 22, to which I presume the hon. Member for Beckenham (Mrs. Lait) will speak. The matter was raised in Committee, and I agreed that it was a legitimate question that should be debated. We all want to ensure that pension schemes and other financial products are properly regulated and that there are routes to deal with consumers' concerns.
As my hon. Friend the Economic Secretary acknowledged when a similar clause was debated during the Report stage of the Financial Services and Markets Bill, there is a certain logic to the proposal. However, there are reasons why both the pensions ombudsman and the Occupational Pensions Regulatory Authority should remain separate from the Financial Services Authority and the financial ombudsman service.
I shall first clarify the current position. OPRA is a regulatory body that was set up to help to ensure that occupational pension schemes comply with the provisions of the Pensions Act 1995. That role is different from that performed by either the pensions ombudsman or the financial ombudsman service in that those organisations deal with complaints from individual scheme members, employers or trustees; they do not regulate. It would be inappropriate to combine the functions of a regulator with those of a complaint-handling body. That principle has been applied to the Financial Services Authority and the financial ombudsman service; they are separate and independent, although linked, organisations.
The financial ombudsman service's compulsory jurisdiction is linked to regulation by the FSA. If an individual or organisation is authorised by the FSA, they come within the compulsory jurisdiction of the financial ombudsman service.
On the other hand, the pensions ombudsman has jurisdiction over employers and trustees in relation to both occupational pension schemes and personal pensions. The jurisdiction is also compulsory in that there is no opt-out. Sponsoring employers and trustees of pension schemes are not authorised by the FSA and it would not be appropriate for them to be so.
Bringing the pensions ombudsman's functions into the financial ombudsman service would mean that employers and trustees would have to be authorised by the FSA, which would not be sensible; or that the clear link between authorisation and compulsory jurisdiction would

be broken. It would not be practical to extend the financial ombudsman service's compulsory jurisdiction to include all those, such as trustees and sponsoring employers, who come within the remit of the pensions ombudsman.
It is important that consumers are clear about whom they should go to for advice and to complain. The common theme is the office of the pensions advisory service. OPAS handles information and guidance concerning personal pensions and occupational schemes, and will cover stakeholder schemes. It is ideally placed to steer consumers toward the most appropriate place for their concerns to be dealt with. Indeed, the Financial Services and Markets Act enables the financial ombudsman service, with the consent of the complainant, to refer a case to another body, such as the pensions ombudsman, for resolution by that body. Those provisions were included with the pensions ombudsman in mind, to ensure that the consumer can benefit from a seamless service in respect of pensions issues.
Furthermore, we shall work with both the financial ombudsman service and the pensions ombudsman to ensure that the lines between the two are clear and that consumers have access to the right organisation to deal with the concern raised. We want to ensure that consumers are clear about where their complaint will be dealt with.
I had to stick to my text, because it is important that we make clear the reason why we do not want to accept new clause 22. I hope that I have demonstrated that the Occupational Pensions Regulatory Authority, the pensions ombudsman and the financial ombudsman service operate in connected, but different, spheres and that there are therefore good reasons why those organisations should remain separate. However, I assure the House that we remain aware of the issue of clarity for the consumer. We shall develop ways in which to ensure that it is clear who consumers should approach. If, at any time, the Government fall down in that respect, I hope that right hon. and hon. Members will bring it to our attention.

Mrs. Lait: I am grateful to the Minister of State for his detailed explanation of the role of the pensions ombudsman, OPRA and OPAS. If it took so long to explain that to people who are interested in the subject, I dread to think how long it would take to explain to someone who was trying to navigate their way around the issue. However, as the right hon. Gentleman has been kind enough to set out the Government's reasoning clearly, we should like to go away and think about his comments, perhaps with a view to returning to the issues in another place.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 30

CUSTODIANSHIP OF INVESTMENTS

'.—(1) The trustees or managers of an occupational pension scheme or a personal pension scheme must secure that investments held for the purposes of the scheme are held in accordance with an agreement made between the trustees or managers and an appropriate authorised person ("the custodian") which contains the provisions mentioned in subsection (2).
(2) Those provisions are—

(a) that the investments are held in the custodian's name and he maintains adequate records for identifying them as belonging to the scheme and not to himself or any other person,


(b) that the custodian is required to safeguard the investments,
(c) that all documents of title relating to the investments are kept in the custodian's possession and may not be delivered to any other person except—

(i) to another appropriate authorised person with whom the trustee or managers have made an agreement within this section or in accordance with instructions from the scheme's fund manager, and
(ii) upon a request which is signified in the manner specified in the agreement,
(d) that all arrangements and transactions relating to the investments are conducted and recorded in the manner and within the period so specified,
(e) that adequate arrangements are made for the deposit or investment of money received by the custodian in pursuance of the agreement and for the payment by him of money required for the purposes of the scheme,
(f) that the custodian is responsible for securing that the trustees and managers are fully informed of all matters relating to the investments within a period which is reasonable having regard to the importance of the information,
(g) that, in any case where the custodian is also a person to whom any discretion to make any decision about investments has been delegated under section 38, the functions exercisable by him as custodian are adequately differentiated from those exercisable by him by virtue of that delegation,
(h) that the custodian is liable for any reduction in value in the assets of the scheme arising from any breach of his obligations under the agreement, and
(i) such other provisions as the trustees or managers consider appropriate for securing the safeguarding of the investments of the scheme.
(3) Where an agreement in relation to the investment held for the purposes of a scheme has been made with a custodian in accordance with this section—

(a) except in prescribed circumstances, the custodian shall not be regarded as a trustee or manager of the scheme by virtue only of complying with such provisions of the agreement as are mentioned in subsection (2), and
(b) the trustees or managers of the scheme are not responsible for any act or default of the custodian in the course of exercising his functions as such if they have taken all reasonable steps to satisfy themselves—

(i) that he is an appropriate person to appoint as custodian, and
(ii) that he performs his functions under the agreement competently.
(4) Subject to any restriction imposed by the scheme, an agreement under this section may include provision enabling the custodian to make arrangements with another person for him to exercise any of the custodian's functions under the agreement; and where the custodian makes such arrangements this section shall, except in prescribed circumstances, apply in relation to the other person as it applies to the custodian.
(5) Regulations may—

(a) provide that this section does not apply, or
(b) modify it in its application,
to schemes or investments falling within a prescribed class or description.'.—[Mr. Butterfill.]

Brought up, and read the First time.

Mr. Butterfill: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: New clause 31—Supplementary provisions concerning custodianship—
'.—(1) In section (Custodianship of investments) references to an appropriate authorised person are to a person who—

(a) is regulated in the carrying on of business consisting of the holding of pension scheme investments in accordance with such agreements as are mentioned in that section by a body which is a recognised self-regulating organisation for the purpose of the Financial Services Act 1986, and
(b) subject to subsection (2), is not connected with the person who is the employer in relation to the scheme in question.
(2) Paragraph (1)(b) does not apply—

(a) where the employer is an institution authorised under the Banking Act 1987 or a prescribed person and the arrangements made under this section comply with such further requirements as may be prescribed, or
(b) in prescribed circumstances.
(3) Section 2(1) of the Financial Services Act 1986 (power to extend or restrict the meaning of "investment" and "investment business" for the purposes of all or any provisions of that Act) shall apply in relation to the provisions of section (Custodianship of investments) and this section as it applies in relation to the provisions of that Act.'.
New clause 34—Company takeovers: trustees rights—
'.—In circumstances where the employer changes the trustees will be consulted by the existing employer on any issue that would have any impact upon the pension fund or monies due to it, prior to the transfer.'.
Amendment No. 83, in schedule 5, page 105, line 9, at end insert—Minimum funding requirement—
. In section 56 of the 1995 Act (minimum funding requirement) subsection (4) shall be omitted.'.

Mr. Butterfill: I rise to speak briefly to new clauses 30 and 31. They are not new clauses, in that they are not new to the House: they were first debated during consideration of the Pensions Act 1995. Their author was the National Association of Pensions Funds, and they were first proposed by the right hon. Member for Glasgow, Anniesland (Mr. Dewar), now First Minister in the Scottish Parliament. He was absolutely right to propose the provisions, because the issue of custodianship of assets is a vital one.
The 1995 Bill was, in many ways, a reaction to the Maxwell pensions scandal. The only reason why Mr. Maxwell could get away with his nefarious deeds was that he could get his hands on the securities that were held by the pension fund, and falsely pledge them to the bank as being assets of his company. If he had not been able to do that, none of the Maxwell scandal could have occurred. It would have been much more difficult for him to do that if he and his co-trustees had been required to have an independent custodian holding those securities—a custodian who would have asked why Mr. Maxwell personally needed his hands on those documents.
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If we proceed with the two related new clauses in my name, it will make it very much more difficult—not impossible, but very much more difficult—for a future Maxwell to behave in that way. Of course, even an independent custodian must hand over securities if required but, given the responsibilities that custodians


now have under legislation, and given the responsibilities that would be placed on them by the new clauses, they would be required to ask pertinent questions before they gave in to any unusual requests of that nature. Under the new clauses, they would also have responsibility if they did not behave with due discretion in these matters. Such clauses are the only way of preventing a future Maxwell.
The previous Government argued, and the present Government are arguing, that the new clauses are unnecessary for a number of reasons. One is that custodians are now adequately regulated. They are indeed regulated under the Pensions Act and under the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996.
The second reason given is cost. That was dealt with last time. The National Association of Pension Funds estimates that, for the average scheme, the cost of independent custodianship would be one twentieth of 1 per cent. of the total of the assets. That is not an exorbitant amount. It is an amount that any reasonable scheme could bear for the security that would be given to its members.
The third reason given by the Government when the matter was last considered was that there was no legislation in place to regulate the operation of the custodians themselves. The Government said that we would have to wait until the relevant legislation determined how they would be regulated. If the custodians could be regulated, perhaps such a proposal would work.
Well, the custodians are now regulated. The legislation has done its job. The Occupational Pensions Schemes (Scheme Administration) Regulations 1996 have done their job in regulating the activities of custodians, as the Minister confirmed to me. This is the only way in which we can prevent someone from acting as Maxwell acted. There is now no reason why that should not be done. All the pieces of the jigsaw are in place.
It is no use the Minister or others saying that most schemes already have independent custodians—of course they have—and that only small schemes do not have them. In my constituency, small firms have gone bust. The entrepreneur who was running them had appointed his cronies as trustees of the pension fund, and ran off with the money. That can still happen even today, regrettably. Only a measure such as the new clauses can prevent it.
I apologise for detaining the House, but these are important subjects. Amendment No. 83 would amend section 56 of the 1995 Act in a way that would change the operation of the minimum funding requirement.
The amendment's intention is to permit fund trustees to take into account the total return on their assets rather than simply to consider the income that derives from them to match the fund's future liabilities. I admit that the amendment that I tabled is incompetent and does not achieve the effect that I intended. People who are more expert than me have pointed that out. Nevertheless, it is important to debate the subject.
I declare an interest on behalf of all hon. Members: I am a trustee of the parliamentary contributory pension fund. I also acknowledge the assistance that I received from the National Association of Pension Funds, the Institute of Actuaries and especially from Mr. Graham Bishop of Salomon Smith Barney. His research paper "Understanding Bond Markets" has been an invaluable source of statistical information.
I have already emphasised the importance of the 1995 Act in response to the Maxwell scandal. It ensured that funds were maintained at a sufficient level to meet future requirements. The Act authorised the Secretary of State to issue regulations to govern such activities, especially the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996.
Paragraph 7 of the regulations causes particular anxiety. It is headed "Determination and Valuation of Liabilities". Sub-paragraph 3 provides that there is an assumption that all liabilities will be met through investment in gilt-edged securities. That is the crux of the problem. If liabilities have to be met through such investment, and gilt-edged securities are continually decreasing, the yield to the fund will steadily diminish.
I first raised the matter when the original legislation was made. My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) wrote me a letter—now known in the industry as the Butterfill letter—which relaxed the regulations to permit large funds to invest a specific proportion of their matching in equities rather than gilts.
However, the requirement to match a significant proportion of a scheme's future liabilities by investment in long-term gilts remains. It has created the problems that I now want to tackle. Of course, I know that the Government recognise that a problem exists and that they are conducting a review of the operation of the minimum funding requirement. However, I am worried by rumours that the outcome of the review may consist of little more than proposing an extension of the requirement to invest in gilts to allowing additional investment in high-quality corporate bonds. Unfortunately, that would be a palliative. It would do little more than apply sticking plaster to a gaping wound in the whole system of pension provision; a wound that is getting wider and deeper with every month that passes.
The problem arises not from one factor but from a series, which interact cumulatively to produce a most alarming problem. I shall outline those factors. The first is increasing life expectancy. We all live much longer. Secondly, there is an increase in the demand for gilt-edged securities not merely by pension funds but by insurance companies, which are required by regulation to match their liabilities in their reserving regime. Thirdly, there is a reduction in the supply of long-dated gilts due to an improved inflow of funds to the Treasury as a result of increasing economic activity and significant increases in taxation by the Government as a percentage of gross domestic product.
The last factor may be alleviated. The Red Book shows that the Government may move from a surplus to a growing deficit over the next few years. That factor may therefore be less serious than we anticipate. However, the first two factors are likely to become much more serious for the foreseeable future.
The improved health in our nation is likely further to extend life expectancy and thus the long-term liabilities of funds for such funds will require them to hold a rising proportion of gilts as their members age. That has been exacerbated by the Government's decision in 1997 to remove the ability of pension funds to reclaim advance corporation tax on dividends.
Gilt yields have halved in the past few years and that trend accelerated following the rush for valuations ahead of the 1997 deadline, with the resultant sharp rise in long gilt purchases as the funds decided to strengthen their position. As a result, the 15-year gilt yield fell by more than 30 per cent.—from 7.6 to 4.9 per cent.—in the two years between 1997 and October 1999. The inexorable movement in that direction is exacerbated by the fact that the actuaries to the funds are allowed no discretion in their valuations.
The problem that we face is that the current system forces funds to switch from equities to gilts. That in turn drives down the yield on gilts, which in turn creates a need to purchase still more gilts to match the future liabilities. Thus we are creating an inexorable downward spiral of gilt yields, fed by itself. That is an investment black hole into which an increasing proportion of funds is sucked with calamitous potential results for purchasers, equity investment and our national well-being.
The Government have stated that they are keen to encourage savings for retirement and that an increasing proportion of those savings should be invested in the productive economy, particularly the newly emerging high-tech sector. However, if a fund chooses an investment policy with a higher equity content, which the Government say that they want, rather than matching the equity-gilt balance used in calculating the liability and if gilt yields then decline relative to equity yields, the current value of the "pensions in payment" and the "approaching requirement" segments of that liability, subject to the equity easement to which I referred earlier, will rise relative to the equity-based assets. Thus, the minimum funding requirement ratio of assets to liabilities will deteriorate.
Unless the Government take immediate action to remedy that situation, the results will be disastrous. First, they will not be able to achieve their ambition to persuade UK funds to invest in the productive sector of the economy. That is already apparent as the overwhelming bulk of funds flowing into British venture capital companies arises from investments in those companies by United States pension funds. The Government of that country have created more enlightened rules for investment by pension fund trustees.
Secondly, the yield on long-dated gilts will continue to fall. That creates huge distortions in our funding system where the yield on long gilts is massively lower than that for short-term interest rates. Indeed, although UK short-term interest rates are double those prevailing in the rest of the European Community, yields for 10-year bonds are three percentage points less than those of their German counterparts. Incredibly, we are approaching a position where the Government could find it to their advantage to repay the notorious 3.5 per cent. war loan.
The impact of falling gilt rates on annuities has been disastrous for those who have reached retirement age and who had prudently saved for their retirement through personal pension schemes. As The Sunday Times pointed out on 26 March, after the Budget, in 1990 a man of 65 could have bought a pension of about £1,500 a year for every £10,000 that he had saved in his pension fund. Today, he would get about £900 a year—almost half—and the figure continues to fall. Our system betrays all

those who have saved through personal pensions, particularly as most would have achieved a far better and more flexible result had they saved through one of the alternative investment vehicles, which I pointed out in the previous debate.
Thirdly, the rules do not operate for the benefit of future pensions. Funds invested in pension schemes, whether personal or occupational, have been so successful because of the rising rate of equities and the benign overall economic climate created by increasing investment. Perversely, the minimum funding requirement as presently constituted will transfer the amount invested in the productive sector of the economy to the far less productive fixed interest investment sector. It is therefore extremely unlikely that the value of pension funds will grow as it has in the past and there could be serious implications for the future well-being of those making pension savings today.
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The answer to the problem will not be to allow limited and highly regulated investment in high-quality commercial bonds. The yield on those bonds will fall, and the contribution that they can make to investment requirements is of necessity limited. Such a move would have only a temporary palliative effect. The answer is to move away from mechanistic actuarial calculations based solely on income flow and towards a system that realistically and conservatively assesses total investment returns. That policy is now being adopted by the trustees of many institutions other than pension funds.
I serve on the council of management of the People's Dispensary for Sick Animals. As that charity has substantial on-going liabilities for the monthly payment of the salaries of veterinary and other staff, the investment policies that we dictated to our fund managers were, until recently, income constrained. We realised that it did not matter whether the money coming into the charity was income or from capital gains, so long as we got in enough money. We decided that, provided that our calculations were prudent and likely to produce sufficient funds, we could change the whole basis of our investments. So it should be with pension funds.
If the present trend continues, we could arrive at a situation in which funds have capital values that massively exceed any reasonable calculation of future liability, but their income is so poor as a result of declining gilt yields that they are constantly forced to add to their capital funds. We have surely created a regulatory madhouse, which the Government must reform without delay.

Mr. Andrew Miller: I never thought that the day would come when I would find myself agreeing with a significant part of what the hon. Member for Bournemouth, West (Mr. Butterfill) has said, especially in his earlier contribution. I profess a certain ignorance on the latter points that he made, but I am pleased that he is looking after our pension fund in the House.
The hon. Gentleman raises some important points. I shall refer to new clause 34 and the question of takeovers. It was interesting to hear the exchange last week and again today between the hon. Member for Solihull (Mr. Taylor) and the Secretary of State for Trade


and Industry on the position of Rover. The hon. Member for Bournemouth, West raised a particularly important point about smaller companies.
I sought to introduce a private Member's Bill on this point in the previous Parliament, but I was persuaded by the then Government that the issues that I was raising would be covered by the Pensions Act 1995. To be fair, a significant number of improvements were made at that time. Sadly, the collapse of H. H. Robertson's in my constituency early in 1997 shows that the 1995 Act may need strengthening further.
In commenting on that case, I should like to pay tribute to a number of colleagues. 1 mentioned the hon. Member for Solihull, who in his position in the previous Government referred this case to the Serious Fraud Office. His successors have also been extremely helpful. The noble Lord Harrison of Chester and the noble Lord Hunt of Wirral have made positive contributions in this area. My right hon. Friend the Member for Birkenhead (Mr. Field) is still working with me on this case, as are other local colleagues. Many of them, including the Under-Secretary, my hon. Friend the Member for Wallasey (Angela Eagle), have constituents who are affected by this terrible tragedy. The Minister of State, Cabinet Office and the Deputy Prime Minister have consistently taken an interest in this case.
This collapse came about after an asset-stripping operation by Mr. Ric Wharton, who bought the company for £1. He made a pretence of reviving the company, but in reality he made a lot of money at the expense of the company's creditors. Sadly, and perhaps wrongly, pension funds are unsecured creditors, so when the company was refinanced by a conventional bank loan, the fund fell further down the pecking order of creditors. The net effect was that, when the company collapsed, the pension fund had a shortfall of about £5 million. Now, pensioners are surviving on about 25 per cent. of their pension entitlement, while Mr. Wharton lives in the lap of luxury.
Many of the people who lost their jobs would have been far better off had they chosen to retire, rather than taking a pay cut—at Mr. Wharton's behest, and having had no real choice, and no knowledge of how to handle the situation. Had they done so, the state would, ironically, have saved money, because the amount now being paid in benefits is astronomical. At that point, the company's assets would have largely covered its debts, including those of the pension fund. The trouble is that those concerned were not entitled to the key information, and had to rely on the word of someone who has since proved to be less than straightforward. The new clause would put a little power back into the hands of pension funds in similar circumstances.
I realise that, in its present form, my proposal would have serious implications for company legislation, but I hope that the plight of my constituents will persuade the House to ensure that what I have described never happens again. I accept that the whistleblowing and other provisions of the 1995 Act help, but they do not entirely deal with the problem.
I know that the new clause does nothing to help my constituents, but all to whom I have spoken agree that no one else should suffer what they have suffered. I urge my right hon. Friend to do all that he can to protect funds at the point of takeover, by agreeing to look at the practical effects of this dreadful case on real people and legislating accordingly.

Mr. Field: Like the hon. Member for Bournemouth, West (Mr. Butterfill), I will speak briefly.
I support the campaign spearheaded by my hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller) on behalf of his constituents, and people in surrounding constituencies. Many worked hard for what was, they thought, a full working life, expecting to retire on a decent pension; they now find that their pensions are so reduced that they will not even be able to claim the minimum income guarantee, because they will be just above the qualifying level for income support. This is a very important issue, and I hope that those in the other place will be able to examine it again.
The hon. Member for Bournemouth, West, citing the Maxwell effect on pension funds, asked whether all the checks that we could put in place were there to protect pension funds. In the other place is the person who recovered most of the funds for the Maxwell pensioners. Perhaps when the Bill moves there, he will be the appropriate person to look at not only new clause 30, but new clauses 31 and 34.

Mr. Rooker: I almost feel tempted to say, "Let's call it a day and send the Bill to the other place." I am sure that those in the other place will find a more civilised and conducive time for discussion. However, we plod on.
That is not a complaint, by the way. It is not a complaint about the new clauses and amendments that have been tabled, or about the debate—far from it. A vital part of life in this country is the protection of the interests of pensioners. However, I do not think we are in a position to do the subject justice here at five minutes to midnight. I have no problem with the idea that we may look at the matter again in the summer.
The hon. Member for Bournemouth, West (Mr. Butterfill) was good enough to warn me that he intended to table the new clauses. We have engaged in correspondence, but I may not have convinced him fully in that, and I think it useful to present the Government's views again.
As the hon. Gentleman knows, new clauses 30 and 31 are identical to those tabled in Committee in June 1995, during consideration of the Pensions Act 1995, by my right hon. Friend the Member for Glasgow, Anniesland (Mr. Dewar), who then represented Glasgow, Garscadden and who is now Scotland's First Minister.
The Government of the day rejected those new clauses—I hate to have to read this out, but it is true—for reasons that I find as persuasive today as they were in 1995. [HON. MEMBERS: "Hear, hear."] I am being as honest and open as I possibly can. However, the fact is that when one is in opposition, one does not always have access to all the necessary information on the arguments. When one crosses over to the other side of the Chamber, one sometimes discovers that the arguments are not quite as one thought that they were.

Mr. Kevin Hughes: That works both ways.

Mr. Rooker: Yes, but I prefer crossing the Chamber in this direction.
The use of custodians in occupational pension schemes is as widespread today as it was in 1995—it is more or less universal. A very small minority of schemes do not


make use of custodians, but most schemes regard the use of custodians both as good practice and as a prerequisite for carrying on investment in certain overseas markets.
There are, therefore, two issues to be considered in relation to new clauses 30 and 31. The first is whether the use of custodians significantly increases the security of scheme assets and should be made mandatory for all occupational pension schemes. The second is whether—and, if so, in what manner—the conduct of custody business should be regulated. New clause 30 deals with the first issue, and new clause 31 with the second.
In 1995, the predecessor to new clause 30 was rejected because both the Government of the day and the then hon. Member for Garscadden recognised that the Pensions Law Reform Committee, under the chairmanship of Professor Goode, had taken the view that the appointment of a custodian could give only the illusion of security. The appointment of a custodian does not in itself increase the security of scheme assets, as the custodian is required under the terms of the custody contract to release the assets in question provided that the instructions to do so are issued in the manner stated in the contract.

Mr. Butterfill: I had anticipated that the Minister would make that argument, which has been made before. However, the situation has now changed. When that argument was first made, we did not have the regulation of custodians that we now have under the pensions regulations and the Financial Services Act 1986. The onus on custodians is, therefore, now much greater. However, even if that were not the case, the onus imposed on custodians by the new clauses would deal with that point.

Mr. Rooker: I am grateful for that intervention, as it gave me time to find the note that I was looking for. I have already partly dealt with the point, but I also accept the hon. Gentleman's comments on the changes, which I shall deal with in a moment. However, he made the point that the use of custodians would have stopped Maxwell and prevented other people from raiding pension fund assets. That is not strictly true. Some of the assets misappropriated by Maxwell were placed with independent custodians, but that did not stop him. Independent custodians also would not necessarily deter another Maxwell. The custodians are bound to release the assets that they hold in accordance with their contracts.
The man was a crook, and a determined one. It is very difficult to guarantee that we can prevent all future problems caused by determined fraudsters, although we can erect the best barriers possible—and considerable barriers have been erected since 1995. However, appointment of a custodian offers no significant protection against a determined fraud. That holds true today.
The Government therefore consider that the voluntary use of custodians by occupational pension schemes recognises both the advantages of custodianship and its inherent limitations. Making use of custodians mandatory might well convey the impression to scheme members that the assets of their schemes are secure, when in fact they are no more secure than they would be if no custodian were used.
Additionally, for the small number of schemes which for reasons of their own do not make use of custodians, making their use mandatory might place additional and

unnecessary financial and administrative burdens on schemes whose arrangements for security of scheme assets serve them perfectly well and have done so for many years.
The only point that I need to make on new clause 31 is that, since June 1997, as the hon. Member for Bournemouth, West said, the investment activity of custodians has been regulated under the Financial Services Act 1986. There is no need to set up a new regulatory body to oversee custody business.
On amendment No. 83, as hon. Members are aware, the Pensions Act 1995 introduced various measures aimed at—

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Mr. Butterfill: Will the Minister address the fact that even the latest legislation does not require arm's-length appointment of trustees, as the new clause would?

Mr. Rooker: I am not seeking to give the impression in my response, inadequate though it may be, that the position is perfect and everything is locked down. No doubt we shall return to the issue in due course.
A number of measures were introduced in the 1995 Act with the aim of promoting security for members of pension schemes, including the minimum funding requirement. It is important to protect members and the benefits that they are promised. There can be no objection to that.
Amendment No. 83 would undermine the minimum funding requirement for some schemes, which would be considered as meeting the requirement even if there were insufficient funds to meet the rights of members on the basis on which they were accrued. If a scheme was not funded to the minimum requirement, the liabilities—the members' pension rights—could be reduced to the level of the assets available in the scheme rather than increasing contributions.
The minimum funding requirement is not a guarantee of solvency. I freely admit that as a lay person I had thought it was. In the past eight months, since I have been at the Department of Social Security, I have looked at the issue in more detail. The lay person can get a false impression from the minimum funding requirement. It is not intended to force employers to contribute at a higher rate than is needed in the long term to meet the benefits promised.
A wide-ranging review of the minimum funding requirement is being carried out by the Institute of Actuaries and the Faculty of Actuaries in Scotland, in partnership with the Department of Social Security. It has been a significant and detailed review, with different groups looking at seven different papers and sub-groups set up. The report is due this spring. There will be full consultation on any changes that we propose. We have to strike the right balance. This can be a sensitive issue, because of the differences in pension funds. In the light of what I have said, I hope that the hon. Gentleman will withdraw the motion, on the promise that the issue will be raised in the other House.
I pay tribute to my hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller), who raised the issue behind new clause 34 with me a few weeks ago in respect of the former members of the H. H. Robertson pension scheme. He has been a tireless campaigner and


has a good record for raising the issue with Ministers in my Department and the Department of Trade and Industry. The sale of a business by one employer to another is a common occurrence. There are provisions in pensions legislation to protect the funding of pension schemes. I freely accept that those provisions were not in place when the relevant events at H. H. Robertson occurred, but I hope that my hon. Friend accepts that they are in place now and are worthwhile additions to the protection afforded to scheme members.
My hon. Friend alluded to the situation at Rover. In that case, one company has been sold to two other companies, with a bit of it being retained by the current owner, as I understand it. Occupational pensions are voluntary. There is no requirement to run a scheme and I have no information on Alchemy's proposals. Ford is a responsible employer of many thousands of people in this country with occupational pension schemes. We can assure Rover employees who are members of the existing occupational pension scheme that the pension rights that they have already earned are protected. It is crucial that that is understood. The trust arrangements are irrevocable.
I do not know the details of the Rover scheme, but it is true that surpluses sometimes accrue. It is a moot point who owns the surplus. The legal authority is such that the surplus is not in the members' ownership: as long as the money is there and the pensions are being paid, it seems to be in the ownership of the employer. That is a not unimportant point: especially when large companies break up other companies and sell them as though they were a row of cans on a supermarket shelf, it is crucial to ensure that the protections put in place after 1995 are thoroughly explored and the schemes are secure for current pensioners as well as those who are paying in for the future.
Trustees have a role in seeking to ensure that debts due from an employer are paid promptly, including any debts created by ceasing to participate in the scheme, if the scheme is underfunded or if no contributions, or the incorrect contributions, are paid. My hon. Friend the Member for Ellesmere Port and Neston spoke about the Serious Fraud Office being called in. I have no information on that aspect of the specific case, and it would be improper for me to speculate on it.
The minimum funding requirement should lessen the risk that a scheme is underfunded through, for instance, an over-extended contributions holiday. There are many home-grown blue-chip companies in this country that have not paid a penny into their pension funds for years. Many of my constituents who are members of the Lucas pension fund have often had cause to speak to me about that situation.
The MFR is an on-going requirement on schemes to monitor their funding position and to have in place a contributions plan to ensure that the appropriate funding level is maintained. The Occupational Pensions Regulatory Authority must be told if employers fail to stick to the contributions plan and to pay contributions on time.
We are aware of the importance of protecting members' rights. That is the bottom line. If we cannot do that, they have no one else to look to. Where there are gaps in the legislation, we must block them. There is no evidence of major difficulties. Reviews are going on and we will report the results to the House as early as we possibly can.

There will be full consultation on any changes that we propose, and one can assume from that that there will be further debate on the issue.

Mr. Butterfill: I am grateful to the Minister for that response, but I do not accept his arguments on custody. Of course, some of the Maxwell funds were held by custodians, but custodians were not regulated at that time, so that argument does not hold water. They are now properly regulated, although I think that the regulations could have been improved, and the need for custodianship remains.
Of course, nothing that we can do will prevent a determined fraudster from getting his way—we cannot stop crime—but we can make it a darn sight more difficult for such a fraudster, and that is what we ought to do. I do not understand the argument advanced by both the previous and the present Government, that investors would be lulled into a false sense of security. How would that change their behaviour? Would they not then belong to their company's pension scheme? The argument is a non sequitur. We need to give investors as much security as we can.
The argument on cost does not stand up either. Anybody would be prepared to pay one twentieth of 1 per cent. for the benefit of that security. Does the Minister really think that custodians, who are now properly regulated, would hand over the assets, just like that, to a company boss who happened to ask for them, because he was a trustee of the scheme? Does he think that the trustees of the parliamentary contributory pension scheme would hand over to me or to other trustees all the securities that we hold on behalf of Members of Parliament? Of course they would not. The matter should properly be considered in another place, so I will not seek to press the matter to a Division. I am grateful to the Minister for his assurances on the minimum funding requirement. I hope that the review is thorough and that what I have said contributes in some small way towards it, but I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Clause 40

MEMBER-NOMINATED TRUSTEES

Mr. Miller: I beg to move amendment No. 70, in page 35, line 25, at end insert—
'(za) The word "and" shall be omitted and after paragraph (a) there shall be inserted—
"( ) that in the case of schemes which fall in a prescribed class, that such arrangements for the selection of persons nominated by pensioner members and deferred members of the scheme to be trustees of the scheme as are required by this section are made, and".'.

Mr. Deputy Speaker (Sir Alan Haselhurst): With this it will be convenient to discuss the following amendments: No. 72, in page 35, line 30, leave out subsection (3) and insert—
'(3) In subsection (3) (selected persons to be trustees)—
(a) in paragraph (a) for "in accordance with the appropriate rules" there shall be substituted "as a member-nominated trustee"; and


(b) after paragraph (b) there shall be inserted—
"(c) for member-nominated trustees to be selected only by the members of the scheme or their representatives;
(d) regulations may prescribe who is a representative for the purpose of paragraph (c).".'.
No. 71, in page 35, line 39, at end insert—
'(5A) In paragraph (b) of subsection (6), after the words "total number of trustees" there shall be inserted the words "and in the case of schemes to which paragraph (b) of subsection ( 1 ) above applies, at least one additional trustee nominated by the pensioner members and deferred members of the scheme.".'.
No. 95, in page 35, line 41, after "(6A)", insert—
'The arrangements must provide that pensioner members of a scheme have the same rights of nomination and selection for member-nominated trustees as all other members of a scheme.
(6B)'.
No. 73, in page 36, line 19, leave out "and".
No. 74, in page 36, line 22, at end insert—
', and
(c) unless a proposal is made to which section 1 8A below applies, and regulations made under section I8A(4) apply as a consequence. the manner in which the trustees are to inform and consult with the members and former members of the scheme about the effect of the arrangements to be made in accordance with this section.'.
No. 66, in page 36, line 22, at end insert—
'(9A) The Secretary of State shall make regulations providing that all trustees shall be required to have attended an approved training course explaining the role and responsibilities of trustees within six months of being either elected as a member-nominated trustee or appointed as a trustee by the scheme's sponsoring employer.
(9B) Regulations under subsection (9A) shall also prescribe the content of such an approved training course.
(9C) The failure of a trustee to attend such a course as is mentioned in subsection (9A) within six months of being either elected or appointed as a trustee shall nullify the trustee's election or appointment.'.
No. 75, in clause 41, page 37, line 7, at end insert—
'(5A) In paragraph (b) of subsection (6) for the words "at least one third" there shall be substituted "at least one half.".'.

Mr. Miller: In view of the time, I will deliver the abbreviated version of the long tome that I have in front of me.
These amendments to the Pensions Act 1995 would ensure that all schemes have member-nominated trustees by not allowing employers to propose opt-outs with no member-nominated trustees, or with less than one third; would provide a new statutory route for the selection of MNTs, whereby trustees can implement proposals within a framework of legislation and regulations without scheme members' approval having to be gained through the statutory consultation procedure, under which proposals are published and allowed to proceed if fewer than 10 per cent. of members object; and would allow employers to make proposals for MNTs outside the bases permitted by the statutory route, but to subject that scheme-specific route to a more rigorous statutory consultation procedure than now applies.
I turn to amendment No. 70. The National Association of Pension Funds survey indicates that only 30 per cent. of members of private sector occupational schemes are active members—38 per cent. are pensioners and 32 per cent. are deferred members. Ten years ago, the

corresponding percentages were 46 per cent. active, 34 per cent. pensioners and 20 per cent. deferred members. That trend will continue.
There is no doubt that pensioners as a rule do not feel that their interests are adequately considered by trustee boards. There is a widespread misconception that, if pensioners are given an inflation-linked increase, that is all they should and could have. Pensioners tend to feel, with some justification in many cases, that benefit improvements are concentrated on active members.
I move to amendment No. 72. Under current legislation, the provision is for one third MNTs. By default, that means two thirds company-appointed trustees. The amendment says that "member nominated" is not sufficient and we should have "member selected" trustees.
The confidence of members in schemes demands that member trustees be perceived as representing members. We need to make it as clear as possible that member trustees should be independent of the employer. That purpose will be served by requiring that member trustees be in all cases selected by members of the scheme, or member representative bodies, which may be pension committees, trade unions or pensioner associations.
The amendment proposes that, for a scheme above a size to be prescribed, and where pensioners comprise a specified proportion of members to be prescribed, an additional pensioner trustee should be required. Such a basis would be a modest advance on the one-third minimum, but could still allow employer-appointed trustees to remain in a majority.
I come next to amendment No. 71—the debate about a half, rather than a third. The general conclusion drawn on member trustees is that they improve the working of trustee boards both by their input and by ensuring that trustee boards conduct their meetings properly and in accordance with the Pensions Act. They add to member confidence in schemes, which has been so badly damaged, as the hon. Member for Bournemouth, West (Mr. Butterfill) noted, by the actions of Robert Maxwell and of others.
The Government, and bodies such as the National Association of Pension Funds, endorse the view that having 50 per cent. member trustees represents good practice, but are not keen to make that a statutory requirement. However, many large schemes have operated on that basis without alienating the sponsoring employers. The alphabetical list starts with Allied Domecq, British Airways, British Aerospace and BT, and goes right through to the Prudential, Rolls-Royce, Rover, Shell and Unilever. In my previous work, I had some direct dealings with those funds.
12.15 am
Amendments Nos. 73 and 74 would require the trustees to consult on the proposals under the statutory route. Under the new statutory route, where the employer makes a proposal but does not get approval for it under the scheme-specific route, it falls to the trustees to devise and implement proposals for member trustees. They would not be obliged to consult anyone, or to seek member approval for the basis that they devise.
Once implemented, the system would last indefinitely, or until there was a major change in the scheme. Amendment No. 74 proposes a requirement for consultation by the


trustees before they implement a proposal. A possible model may be the existing requirement for the employer to inform and consult members three months before implementing a change in contracting-out arrangements. However, there would need to be a change to include pensioners in that.
In making arrangements for member trustees, a key objective is that members should have confidence in the arrangements. If trustees were able to implement a system without notice or consultation they would run a grave risk of alienating members. The amendment therefore asks for regulations to prescribe a basis for information and consultation before trustees implement proposals.

Mr. Burstow: I shall speak briefly to amendment No. 95, which covers some of the issues outlined by the hon. Member for Ellesmere Port and Neston (Mr. Miller).
We want the Minister to clarify how the rules will work for the constituency structure proposed for the composition of the member-nominated members of trustee boards in the future. The Federation of Post Office and BT Pensioners has expressed concern that the rules will mean that the method of selection and nomination of constituency elements of the member-nominated trustees will work against the interests of pensioners. The federation fears that pensioners' role and representation on trustee boards will be marginalised.
I understand that that concern arose at least in part out of a meeting that the federation had with the Minister and departmental officials. I hope that the Minister will confirm the value that the Government rightly attach in the Bill to the important role that pensioner trustees can play. I hope also that he will make some sort of commitment to the importance of ensuring that the constituency nomination and selection procedures will not limit pensioner members' ability to be represented fairly in the schemes.
The key matter is fair representation for pensioner members, who can bring an independence to the boards of trustees that other members often cannot bring. It would be very helpful to hear some reassurance in that regard.

Dr. Lynne Jones: I will be very brief. I should simply like to remind my right hon. Friend the Minister of State of a meeting that he and I and other Members of Parliament representing Birmingham constituencies attended some years ago with representatives of Lucas pensioners. They left us in no doubt that the pensioner members of the Lucas pension fund had interests very different from those of the other members of the pension funds, and made us aware of the need to ensure that their interests in pensioner funds were represented.
I urge my hon. Friend to listen to the arguments in favour of amendments Nos. 70 and 71, to ensure that funds include pensioner representatives and that they do not take a place that is currently allocated to other members.
Angela Eagle: The amendments cover two related issues—member-nominated trustees and training for pension scheme trustees. On member-nominated trustees, clauses 40 to 43 will ensure that every occupational pension scheme has at least one third member-nominated trustees. The provisions in sections 16 to 21 of the

Pensions Act 1995 have, by and large, worked, but they do not go far enough. There are still too many schemes that do not have member-nominated trustees. The current provisions give the employer the opportunity to propose arrangements that do not include provision for any member trustees.
The Bill legislates for the principle of member-nominated trustees, and puts it into the law for the first time. We want every scheme to have member-nominated trustees, and as a result of the Bill, they will. We believe that they add value, and increase member confidence.
Regular complaints about the current system are that it is too easy to exclude pensioner members from the process, and that the present legislation is too complex and difficult to operate. We have listened and responded to those concerns. Under the new provisions, there will be member-nominated trustees or directors in every scheme. There will be two routes to satisfy the new requirements—we have labelled them the trustee route and the employer route.
Under the trustee route, trustees will implement nomination and selection procedures using a framework set out in regulations. The regulations will provide trustees with flexibility over certain aspects of the nomination and selection procedures. For example, they will be given discretion to divide the membership into constituencies. However, the framework will ensure that all members are treated fairly, so there will be no need for consultation or for member approval. As a result, the process will be simpler and cheaper, which will be widely welcomed.
Under the employer route, employers will have the right to propose bespoke nomination and selection arrangements for their scheme, but the proposal must provide for a minimum of one third member-nominated trustees to be approved by the members. There will be no opportunity to opt out, so every scheme will have member trustees, whichever system is used.
We thought long and hard about whether to provide for a reserved place for a pensioner trustee in large, mature schemes. We decided, on balance, that it would be unwise to do anything to suggest that any trustee has a directly representative role for a particular group of individuals, and that our priority should be to ensure that every scheme has members on the board. That we have done. However, we are aware of concerns that in some schemes pensioner members have been unfairly excluded from participating in the selection of member trustees. That is why we have gone much further to ensure that pensioner members cannot be unfairly treated. The new provisions ensure that pensioner members are included at every stage in the trustee route, and that they will have a say in the approval process under the employer route.
We have worked closely with the pensions industry and other groups, including the TUC, to produce changes that will give members greater participation and confidence in their pension schemes, and at the same time to make arrangements for the nomination and selection of member-nominated trustees easier to operate.
This package of changes represents a real strengthening of the legislative framework for occupational pension schemes, without imposing undue costs or disturbing existing arrangements unnecessarily.
Amendment No. 66 would make it compulsory for all trustees—employer-appointed trustees as well as member-nominated trustees—to attend an approved training course—

Mrs. Lait: We have not spoken to that amendment.

Angela Eagle: In that case, I will just check that I have not missed anyone else's amendment, and sit down. I hope, however, that my explanation has reassured hon. Members about the principles behind the changes that we have put into effect, and that my hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller) will withdraw the amendment.

Mr. Miller: I believe strongly that the Bill is a significant step in the right direction. Some issues that I raised could be dealt with under the regulatory regime referred to by my hon. Friend the Under-Secretary. I understand her point about pensioners being treated as a separate class in terms of the responsibilities of the board of trustees of any scheme. However, that issue requires further exploration. As schemes develop, it may be possible to revisit the issue in future.
I acknowledge the positive changes brought about by the Bill, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

New Clause 21

WAR WIDOWS' PENSIONS—ENTITLEMENT

'.—(1) The Secretary of State shall review the operation of this section when—

(i) a report on the armed forces pension scheme has been laid before Parliament by the Secretary of State for Defence; and
(ii) the results of any public consultation upon a report as cited in subsection (i) above have been published;
and a report of any review carried out under this section shall be laid before Parliament.
(2) Subject to subsection (3), a widow in receipt of a widow's pension under any of the enactments mentioned in subsection (4) ("the DSS pension") and in receipt of a pension paid under the Armed Forces Pension Scheme shall on remarriage or when living together as husband and wife with a member of the opposite sex only retain the Forces Family Pension (attributable).
(3) Subsection (2) does not apply to a widow in receipt of a basic pension under section 44 of the Social Security Contributions and Benefits Act 1992; and a widow in receipt of such a pension who has remarried or is living together as husband and wife with a member of the opposite sex may not retain the Forces Family Pension (attributable).
(4) The enactments referred to in subsection (2) are—

(a) the Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 1983, and any order re-enacting the provisions of that order,
(b) the Personal Injuries (Civilians) Scheme 1983, and any subsequent scheme made under the Personal Injuries (Emergency Provisions) Act 1939,
(c) any scheme made under the Pensions (Navy, Army, Air Force and Mercantile Marine) Act 1939, or the Polish Resettlement Act 1947 applying the provisions of any such order as is referred to in paragraph (a),

(d) the order made under section 1(5) of the Ulster Defence Regiment Act 1969 concerning pensions and other grants in respect of disablement or death due to service in the Ulster Defence Regiment.'.—[Mr. Willetts.]

Brought up, and read the First time.

Mr. Willetts: I beg to move, That the clause be read a Second time.
War widows have a long-standing grievance. When they remarry, they lose their armed forces family pension. We propose, as we have before, that approximately 2,500 post-1973 widows of men killed in the line of duty should retain their right to that pension even if they remarry.
This cause was particularly close to the heart of Michael Colvin, the late hon. Member for Romsey. He contributed an enormous amount to this subject, drawing on his own expertise in the armed forces. It has also been pursued vigorously by Baroness Strange in the other place. Indeed, the Minister of State has previously made encouraging sounds about it, and has made it clear that his heart was with us on this reform. In Standing Committee, he may been over-excited when he said:
I may be putting myself in the hot seat by saying this, but if I were a Back Bencher, I would go for it. As a Minister, I shall, of course, explain why we should not proceed down that road.—[Official Report, Standing Committee F, Tuesday 7 March 2000; c. 751.1
As there are many Back Benchers in the Chamber, on both sides, I hope that the Minister will encourage them to vote for the new clause, which would rectify an injustice at modest cost. We understand concerns about the need to ring-fence the provision; we accept that, but the provision should be made to protect a narrow group of war widows. In the light of the review currently being undertaken, I hope that the Minister will feel able to accept our proposal.

Mr. David Heath: This is the third time that we have debated an amendment of this sort during the past six months. As the hon. Member for Havant (Mr. Willetts) said, there are clear reasons for doing something about the group of war widows involved. It would provide justice for them and their families, enabling them to rebuild their lives and get on with normal life without losing out. The cost to the Exchequer is minimal. Indeed, given the limited number of people involved, the change might even be beneficial because of the effect that it would have on morale in the services. We all know of the current recruitment and retention problems. The attitudes displayed by the current arrangements are frankly out of date in treating widows as chattels of their late husbands. We should not tolerate that any longer.
12.30 am
As the hon. Member for Havant said, in earlier discussions the Minister of State virtually told us that we were right but that he was not allowed to say so. I hope that he will reiterate that intimation this evening. I hope that we shall not hear figures bandied about from the brief as we have on previous occasions. At one point, we were told that this rather modest measure would cost £3 billion. I do not believe that to be the case, or that anyone believes that to be the case. It may have been an inappropriate suggestion.
I am very glad that the Secretary of State for Defence is in the Chamber. I know that he will be listening carefully to what is said and will wish the new clause to be pressed to a Division to assist his deliberations in the review.
We have been entirely consistent on this matter. If I have one small criticism of Conservative Front-Bench Members, it is the fact that I do not recall two consecutive debates in this and another place in which they have taken a consistent position. [Interruption.] Sadly, that is the case. Before 3 November, the Conservative Front-Bench team in another place voted against; when the measure came to this place, the Front-Bench team voted for; when it went back to the Lords, the Front-Bench team abstained; when it came back to this place, the Front-Bench team voted for again.
I hope that the hon. Member for Havant will communicate to his colleagues in another place the importance of the amendment; that the House will support it tonight; and that, even if it is not passed tonight, it will return to us from the House of Lords and we shall be able to put it into law.

Mr. Quentin Davies: I think that it will be in accordance with the mood of the House if I am extremely brief. This, as my hon. Friend the Member for Havant (Mr. Willetts) said, is a cause that has been with us for some time, and which the late Mr. Michael Colvin made his own. He did a magnificent job.
I want to speak to this issue both from the point of view of justice and from the point of view of practicality. From the point of view of justice, there is no doubt that the present situation is illogical, anomalous and, frankly, hypocritical. It has never been suggested that widows should wear their widows' weeds permanently. A widow who formed, for example, a permanent lesbian relationship or a widow who had a kaleidoscopic series of heterosexual relationships would be allowed to retain her pension, but a widow who forms a permanent relationship or gets remarried loses the totality of her pension. As a constituent who is a war widow put it to me, "We really have a choice between celibacy, dishonesty"—that is to say, concealment of the actual position—"and promiscuity." That is an absurd situation in which to place war widows. From the point of view of justice, there is absolutely nothing to be said for the present situation, and it is shameful that it has not already been righted.
From the point of view of practicality, the issue of cost always arises—quite rightly—but in recent wars such as the Falklands war, Operation Desert Storm and so on, the number of our casualties has been very limited, so, fortunately, the group of war widows with which we have to deal post-second world war is relatively small and, we trust, will remain that way. It therefore seems to me that the cost of justice is not very great; and when the cost of justice is not overwhelming, there is absolutely no excuse for the House not to choose the road of justice.

Mr. Rooker: About eight hours ago, when I was discussing national insurance contributions, I alluded to the fact that at that time I was speaking on behalf of my right hon. Friends in the Treasury, and that later in the day, I would be doing the same for another Department. I have been asked to be really brief. This is the time when,

on behalf of my right hon. Friend the Secretary of State for Defence, I have to tell the House that this matter is under consideration and that the situation has not changed since we last spoke. I am not going to bandy about figures. The cost of the new clause is £3 million for the 2,500 war widows.
My right hon. Friend will report to the House. I have raised the matter personally with him, as I said I would in November 1999, when I drew the short straw during consideration of Lords amendments to the Bill that became the Welfare Reform and Pensions Act 1999. Defence Ministers take the issue extremely seriously. The review will come to the House this summer. There will be adequate consultation on it, and I hope that we can reach a satisfactory conclusion on behalf of this very important group of people. I do not want to enter into the debate about how we feel about them, but there is a serious issue to be dealt with, and I hope that it can be dealt with as soon as possible.

Mr. Willetts: We appreciate that the Minister believes that there is an injustice that needs to be corrected. To help him on his way and in his negotiations with the Ministry of Defence, we propose to press the issue to a vote to show how strongly we feel that war widows are entitled to a better deal.

Question put, That the clause be read a Second time:—

The House divided:Ayes 141, Noes 265.

Division No. 140]
[12.35 am


AYES


Ainsworth, Peter (E Surrey)
Fabricant, Michael


Amess, David
Fallon, Michael


Arbuthnot, Rt Hon James
Fearn, Ronnie


Atkinson, Peter (Hexham)
Flight, Howard


Beith, Rt Hon A J
Forth, Rt Hon Eric


Bercow, John
Foster, Don (Bath)


Beresford, Sir Paul
Fox, Dr Liam


Body, Sir Richard
Fraser, Christopher


Boswell, Tim
Gale, Roger


Bottomley, Peter (Worthing W)
Garnier, Edward


Bottomley, Rt Hon Mrs Virginia
George, Andrew (St Ives)


Brady, Graham
Gibb, Nick


Brake, Tom
Gillan, Mrs Cheryl


Brand, Dr Peter
Gray, James


Brazier, Julian
Green, Damian


Breed, Colin
Greenway, John


Brooke, Rt Hon Peter
Grieve, Dominic


Browning, Mrs Angela
Gummer, Rt Hon John


Bruce, Ian (S Dorset)
Hamilton, Rt Hon Sir Archie


Burnett, John
Harris, Dr Evan


Burstow, Paul
Harvey, Nick


Butterfill, John
Hayes, John


Campbell, Rt Hon Menzies (NE Fife)
Heald, Oliver



Heath, David (Somerton & Frome)


Chope, Christopher
Heathcoat-Amory, Rt Hon David


Clappison, James
Hughes, Simon (Southwark N)


Clifton-Brown, Geoffrey
Hunter, Andrew


Collins, Tim
Jenkin, Bernard


Cotter, Brian
Kennedy, Rt Hon Charles (Ross Skye & Inverness W)


Cran, James



Davey, Edward (Kingston)
Key, Robert


Davies, Quentin (Grantham)
King, Rt Hon Tom (Bridgwater)


Davis, Rt Hon David (Haltemprice)
Kirkwood, Archy


Day, Stephen
Laing, Mrs Eleanor


Dorrell, Rt Hon Stephen
Lait, Mrs Jacqui


Duncan, Alan
Lansley, Andrew


Duncan Smith, Iain
Leigh, Edward


Evans, Nigel
Letwin, Oliver


Faber, David
Lewis, Dr Julian (New Forest E)






Lidington, David
Smith, Sir Robert (W Ab'd'ns)


Lilley, Rt Hon Peter
Soames, Nicholas


Livsey, Richard
Spelman, Mrs Caroline


Lloyd, Rt Hon Sir Peter (Fareham)
Spicer, Sir Michael


Llwyd, Elfyn
Spring, Richard


Loughton, Tim
Stanley, Rt Hon Sir John


Lyell, Rt Hon Sir Nicholas
Steen, Anthony


Maclean, Rt Hon David
Streeter, Gary


McLoughlin, Patrick
Stunell, Andrew


Malins, Humfrey
Swayne, Desmond


Mates, Michael
Syms, Robert


May, Mrs Theresa
Tapsell, Sir Peter


Moss, Malcolm
Taylor, Ian (Esher & Walton)


Nicholls, Patrick
Taylor, John M (Solihull)


Norman, Archie
Thomas, Simon (Ceredigion)



Tonge, Dr Jenny


Oaten, Mark
Tredinnick, David


O'Brien, Stephen (Eddisbury)
Trend, Michael


Page, Richard
Tyler, Paul


Paice, James
Tyrie, Andrew


Pickles, Eric
Viggers, Peter


Portillo, Rt Hon Michael
Wardle, Charles


Prior, David
Waterson, Nigel


Redwood, Rt Hon John
Webb, Steve


Rendel, David
Whitney, Sir Raymond


Robathan, Andrew
Whittingdale, John


Robertson, Laurence
Willetts, David


Roe, Mrs Marion (Broxbourne)
Winterton, Mrs Ann (Congleton)


Ruffley, David
Yeo, Tim


Russell, Bob (Colchester)
Young, Rt Hon Sir George


St Aubyn, Nick



Sanders, Adrian
Tellers for the Ayes:


Shephard, Rt Hon Mrs Gillian
Mr. Peter Luff and


Simpson, Keith (Mid-Norfolk)
Mr. John Randall.




NOES


Ainger, Nick
Clark, Paul (Gillingham)


Ainsworth, Robert (Cov'try NE)
Clarke, Charles (Norwich S)


Anderson, Donald (Swansea E)
Clarke, Tony (Northampton S)


Anderson, Janet (Rossendale)
Clelland, David


Armstrong, Rt Hon Ms Hilary
Clwyd, Ann


Atherton, Ms Candy
Coaker, Vernon


Atkins, Charlotte
Coffey, Ms Ann


Austin, John
Cohen, Harry


Banks, Tony
Coleman, Iain


Barnes, Harry
Colman, Tony


Barron, Kevin
Connarty, Michael


Bayley, Hugh
Cook, Frank (Stockton N)


Beard, Nigel
Corbett, Robin


Beckett, Rt Hon Mrs Margaret
Corbyn, Jeremy


Benton, Joe
Cousins, Jim


Bermingham, Gerald
Crausby, David


Berry, Roger
Cryer, John (Hornchurch)


Blears, Ms Hazel
Cunningham, Rt Hon Dr Jack (Copeland)


Blizzard, Bob



Boateng, Rt Hon Paul
Cunningham, Jim (Cov'try S)


Bradley, Keith (Withington)
Dalyell, Tam


Bradley, Peter (The Wrekin)
Darling, Rt Hon Alistair


Bradshaw, Ben
Darvill, Keith


Brown, Rt Hon Nick (Newcastle E)
Davey, Valerie (Bristol W)


Browne, Desmond
Davidson, Ian


Buck, Ms Karen
Davies, Geraint (Croydon C)


Burden, Richard
Dean, Mrs Janet


Caborn, Rt Hon Richard
Dismore, Andrew


Campbell, Alan (Tynemouth)
Dobbin, Jim


Campbell, Ronnie (Blyth V)
Donohoe, Brian H


Campbell-Savours, Dale
Doran, Frank


Caplin, Ivor
Dowd, Jim


Casale, Roger
Eagle, Angela (Wallasey)


Caton, Martin
Eagle, Maria (L'pool Garston)


Cawsey, Ian
Edwards, Huw


Chapman, Ben (Wirral S)
Ennis, Jeff


Clapham, Michael
Field, Rt Hon Frank


Clark, Rt Hon Dr David (S Shields)
Fisher, Mark


Clark, Dr Lynda (Edinburgh Pentlands)
Fitzsimons, Lorna



Flint, Caroline





Follett, Barbara
Mackinlay, Andrew


Foster, Rt Hon Derek
McNulty, Tony


Foster, Michael J (Worcester)
MacShane, Denis


Foulkes, George
Mactaggart, Fiona


Gardiner, Barry
McWalter, Tony


Gerrard, Neil
McWilliam, John


Gilroy, Mrs Linda
Mahon, Mrs Alice


Godman, Dr Norman A
Marsden, Paul (Shrewsbury)


Godsiff, Roger
Marshall, Jim (Leicester S)


Goggins, Paul
Marshall-Andrews, Robert


Golding, Mrs Llin
Maxton, John


Gordon, Mrs Eileen
Meacher, Rt Hon Michael


Griffiths, Jane (Reading E)
Michie, Bill (Shef'ld Heeley)


Griffiths, Nigel (Edinburgh S)
Miller, Andrew


Grocott, Bruce
Moffatt, Laura


Grogan, John
Moonie, Dr Lewis


Hall, Mike (Weaver Vale)
Morgan, Ms Julie (Cardiff N)


Hamilton, Fabian (Leeds NE)
Morley, Elliot


Harman, Rt Hon Ms Harriet
Morris, Rt Hon Ms Estelle (B'ham Yardley)


Heal, Mrs Sylvia



Healey, John
Mountford, Kali


Henderson, Doug (Newcastle N)
Murphy, Denis (Wansbeck)


Henderson, Ivan (Harwich)
Murphy, Rt Hon Paul (Torfaen)


Heppell, John
Naysmith, Dr Doug


Hill, Keith
Norris, Dan


Hinchliffe, David
O'Brien, Mike (N Warks)


Hoon, Rt Hon Geoffrey
Olner, Bill


Hope, Phil
O'Neill, Martin


Hopkins, Kelvin
Osborne, Ms Sandra


Howarth, Alan (Newport E)
Palmer, Dr Nick


Howells, Dr Kim
Pearson, Ian


Hoyle, Lindsay
Pendry, Tom


Hughes, Kevin (Doncaster N)
Perham, Ms Linda


Humble, Mrs Joan
Pickthall, Colin


Hurst, Alan
Pike, Peter L


Hutton, John
Plaskitt, James


Iddon, Dr Brian
Pollard, Kerry


Illsley, Eric
Pond, Chris


Jackson, Ms Glenda (Hampstead)
Pope, Greg


Jackson, Helen (Hillsborough)
Pound, Stephen


Jamieson, David
Prentice, Ms Bridget (Lewisham E)


Jenkins, Brian
Prentice, Gordon (Pendle)


Johnson, Alan (Hull W & Hessle)
Prosser, Gwyn


Johnson, Miss Melanie (Welwyn Hatfield)
Purchase, Ken



Quin, Rt Hon Ms Joyce


Jones, Rt Hon Barry (Alyn)
Quinn, Lawrie


Jones, Helen (Warrington N)
Radice, Rt Hon Giles


Jones, Jon Owen (Cardiff C)
Raynsford, Nick


Jones, Dr Lynne (Selly Oak)
Reed, Andrew (Loughborough)


Jones, Martyn (Clwyd S)
Reid, Rt Hon Dr John (Hamilton N)


Kaufman, Rt Hon Gerald
Roche, Mrs Barbara


Keeble, Ms Sally
Rooker, Rt Hon Jeff


Keen, Alan (Feltham & Heston)
Rooney, Terry


Kemp, Fraser
Ross, Ernie (Dundee W)


Kennedy, Jane (Wavertree)
Rowlands, Ted


Khabra, Piara S
Roy, Frank


Kidney, David
Ruane, Chris


Kilfoyle, Peter
Ruddock, Joan


King, Andy (Rugby & Kenilworth)
Ryan, Ms Joan


King, Ms Oona (Bethnal Green)
Savidge, Malcolm


Laxton, Bob
Sawford, Phil


Lepper, David
Sedgemore, Brian


Leslie, Christopher
Short, Rt Hon Clare


Levitt, Tom
Simpson, Alan (Nottingham S)


Lewis, Terry (Worsley)
Singh, Marsha


Liddell, Rt Hon Mrs Helen
Skinner, Dennis


Linton, Martin
Smith, Rt Hon Andrew (Oxford E)


Lock, David
Smith, Angela (Basildon)


Love, Andrew
Smith, Jacqui (Redditch)


McAvoy, Thomas
Smith, John (Glamorgan)


McCabe, Steve
Smith, Llew (Blaenau Gwent)


McDonagh, Siobhain
Soley, Clive


Macdonald, Calum
Southworth, Ms Helen


McDonnell, John
Spellar, John


McFall, John
Squire, Ms Rachel


McGuire, Mrs Anne
Steinberg, Gerry






Stevenson, George
Twigg, Stephen (Enfield)


Stewart, David (Inverness E)
Walley, Ms Joan


Stewart, Ian (Eccles)
Ward, Ms Claire


Stoate, Dr Howard
Watts, David


Stringer, Graham
White, Brian


Stuart, Ms Gisela
Whitehead, Dr Alan


Sutcliffe, Gerry
Williams, Rt Hon Alan (Swansea W)


Taylor, Rt Hon Mrs Ann (Dewsbury)




Williams, Alan W (E Carmarthen)


Taylor, Ms Dari (Stockton S)
Williams, Mrs Betty (Conwy)


Taylor, David (NW Leics)
Winnick, David



Wood, Mike


Temple-Morris, Peter
Woodward, Shaun


Thomas, Gareth (Clwyd W)
Woolas, Phil


Thomas, Gareth R (Harrow W)
Worthington, Tony


Touhig, Don
Wright, Anthony D (Gt Yarmouth)


Trickett, Jon
Wright Dr Tony (Cannock)


Truswell, Paul
Wyatt, Derek


Turner, Dennis (Wolverh'ton SE)



Turner, Dr George (NW Norfolk)
Tellers for the Noes:


Turner, Neil (Wigan)
Mr. Clive Betts and


Twigg, Derek (Halton)
Mr. Graham Allen.

Question accordingly negatived.

Schedule 9

REPEALS AND REVOCATIONS

Amendment made: No. 58, in page 130, line 7, at beginning insert—

'10 & 11 Geo. 6c.24.
The Naval Forces (Enforcement of Maintenance Liabilities) Act 1947.
In section 1(1), paragraph (aaa).


3 & 4 Eliz. 2 c.18.
The Army Act 1955.
In section 150A, in subsection (2), paragraph (b) and the word "or" preceding it, and in subsection (3), the words "or cancels" and "or (as the case may be) that it has been cancelled".


3 & 4 Eliz. 2 c.19.
The Air Force Act 1955.
In section 150A, in subsection (2), paragraph (b) and the word "or" preceding it, and in subsection (3), the words "or cancels" and "or (as the case may be) that it has been cancelled".


1973 c.18.
The Matrimonial Causes Act 1973.
In section 29, in subsection (7), the words "or is cancelled", "or was cancelled" and "or, as the case may be, the date with effect from which it was cancelled"; and in subsection (8), paragraph (b) and the word "and" preceding it.


1978 c.22.
The Domestic Proceedings and Magistrates' Courts Act 1978.
In section 5, in subsection (7), the words "or is cancelled", "or was cancelled" and "or, as the case may be, the date with effect from which it was

cancelled; and in subsection (8), paragraph (b) and the word "and" preceding it.


1989 c.41.
The Children Act 1989.
In Schedule 1, in paragraph 3(7), the words "or is cancelled", "or was cancelled" and "or, as the case may be, the date with effect from which it was cancelled"; and in paragraph 3(8), paragraph (b) and the word "and" preceding it.'.

—[Mr. Rooker.]

Angela Eagle: I beg to move amendment No. 90, in page 130, line 48, column 3, at end insert—



'Section 24.



Section 26(4)(c).'.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendment No. 97.

Angela Eagle: Amendment No. 97 is extremely minor and amendment No. 90 is consequential. I commend the amendments to the House.

Amendment agreed to.

Remaining Government amendments agreed to.

Order for Third Reading read.

Mr. Rooker: I beg to move, that the Bill be now read the Third time.
I think that I have spoken enough for today.

Mr. Willetts: The Minister has indeed spoken a lot this evening—it is because he has had so much trouble from Labour Members who disagree with his policies. The reason why we have only reached Third Reading at 12.45 am is that the Government have found that a significant number of their Back Benchers are unable to accept their policies.
I should like to congratulate my hon. Friends the Members for Beckenham (Mrs. Lait) and for Brentwood and Ongar (Mr. Pickles), who led for the Opposition in Committee. I also congratulate the other Conservative members of the Standing Committee: my hon. Friends the Members for New Forest, West (Mr. Swayne), for Tewkesbury (Mr. Robertson), for Bromsgrove (Miss Kirkbride) and for Gainsborough (Mr. Leigh). To our regret, the Government did not listen to the pertinent criticisms that they levelled at the Bill.
We have criticised the proposals for the Child Support Agency, especially their inflexibility. The absence of any upper limit means that, however well-off the absent parent becomes, a fixed percentage of his or her income will always be taken by the CSA—the Government will come to regret that. They will also regret their inflexibility regarding the possibility of very affluent parents with care continuing to receive maintenance from absent parents


with far lower incomes. Problems will also arise from the inflexibility in respect of variations: we understand the need for a simpler formula, but if no flexibility is shown about variations, the result will be a system so rigid and inflexible that it cracks under its own weight.
We believe that the provisions relating to the Child Support Agency, as amended by the Bill, will sadly not be the final word on this difficult subject. We agree with the Government, and not with the Liberal Democrats, that child support is best delivered by administrative formula, rather than by returning the matter to the courts. That is where we and those on the Government Front Bench have made common cause. Nevertheless, we do not believe that the application of the formula will be sustainable.
The state second pension is in direct breach of a manifesto pledge to retain SERPS. Ministers claim that no one will be worse off than would have been the case under SERPS, but that is not true. Whole swathes of the population will be worse off than they would have been under SERPS.
People who have earnings from self-employment and employment in the same year will be worse off. The working families tax credit will not earn credits under the state second pension in the way that family credit earned credit under SERPS. Certain groups will be worse off as a result of the shift. Labour Members were elected on a manifesto pledge that they would keep SERPS. They have just voted to get rid of SERPS and to put in its place provision which, for many people, will not be as good.
Labour Members have also voted, for the first time, for home responsibilities protection to end when a child reaches the age of five. That is a significant change in approach, and I have been amazed at the lack of interest shown by some Labour Members. For the first time there has been a signal that if a parent—usually, but not only, a mother—chooses to stay at home when her child is above the age of five, no credits will be earned in the state second pension. When they realise the implications, Labour Members will come to regret the cavalier way in which they voted for that change.
Labour Members have voted for pensions apartheid. It will be extremely difficult for people with earnings below £9,000 to move into funded pensions. The regime under the state second pension will create a divide in pension provision in which we do not believe. We want everyone, as far as possible, to have open and free access to funded pension provision. Sadly, the state second pension will not encourage that. It will have the opposite effect.
Ministers quote apparently enormous figures as the amount that people will accrue as their rights under the state second pension. They will accrue that amount in 40 or 50 years' time. Meanwhile, there will be considerable pensioner poverty, which the state second pension does very little to address.
In an amazing speech, the Minister explained that it would not be possible to increase the basic state pension in line with earnings rather than prices because of the increasing diversity of pensioner incomes. That is an argument which we understand, and which Conservative Ministers used year after year. But when the Minister was sitting on the Opposition Benches, he did not accept it.
At the same time, the Government cavalierly announce that there is to be a universal heating addition and a universal free television licence for people aged over 75.

Those can be universal. Suddenly, there is no problem with those being badly targeted. The Minister is happy to announce those policies, regardless of the income of the pensioner.
On the same day, in the same debate, we have witnessed a totally inconsistent approach to probably the most important and most difficult issue on pensions policy—whether the way forward is universal provision or through targeting and means testing. The Government cannot have it both ways. They cannot tell their own rebels that it is impossible to have universal provision in the basic pension rising more than prices, and then proudly announce that they are putting more money into other universal provision.
There are flaws in the state second pension, just as there are in the child support provisions. We regret the imposition of employers national insurance contributions on private medical insurance. Earlier, we saw the extraordinary sight of Labour Members being whipped through the Lobby in order to vote against a measure announced in the Budget. That must be some sort of first. We heard in the Budget announcement only a fortnight ago that child care provision was not to bear NICs by the employer, and we helpfully tabled a new clause to give effect to that measure. The Government had to whip through their troops to vote against it. The provision cannot be in the Finance Bill because changes to national insurance contributions cannot be made in that measure. The Government will have to introduce a measure after whipping through Labour Members to vote against a provision that the Chancellor announced only a fortnight ago. If this place is not to become the theatre of the absurd, Ministers must stop forcing their troops to participate in such shenanigans. The Government will regret many of the provisions.

Mr. Webb: I shall not match the Minister for brevity, but I will do my best.
I want to comment on the final stages of our proceedings. If the Conservative party had voted with us and the Labour rebels tonight, the Government would have been defeated. Opposition Members can be proud of their achievement in making the Government reconsider the adequacy of the basic state pension.
Like the hon. Member for Havant (Mr. Willetts), who thanked his hon. Friends, I want to thank my hon. Friends the Members for St. Ives (Mr. George) and for Sutton and Cheam (Mr. Burstow) for their hard work in Committee.
The Bill has three main parts and we are worried about all of them. The child support provisions will be regretted. The House once reached an agreement on child support that led to a serious mistake. The provisions will prove to be rough justice and they will not fit our constituents' circumstances. Our constituents will call for change, and change will come. The Bill is insufficiently flexible.
The state second pension is not unworthy in its intentions, but it will take almost for ever to achieve little. It is not an adequate response to the problem of pensioner poverty.
We were unsuccessful in bringing up one subject on Report, but we are sure that our hon. Friends in another place will try to draw attention to the draconian response to those who breach community service orders. That issue may well return to the House.
The Bill does not take social policy forward. We regret that it has come before the House.

Dr. Lynne Jones: Like other hon. Members, I want to go home, so I shall try to be as brief as possible. On Second Reading, I expressed reservations about whether the Bill would achieve the Government's intentions in regard to pension reform. I hoped that improvements would be made through scrutiny in the House. I remain worried about the Government's pensions policy and whether it will stand the test of time.
We wanted to reduce means testing, but there will be more means testing of pensioners. At best, the Bill will reduce the amount of means testing that would have occurred without the provisions. I suppose that that is at least an improvement.
Although they have not yet taken the opportunity to do so, there is still a chance for the Government to relent and improve the level of the basic state pension, and prove that we want it to be the foundation of the pensions system in this country.
The Government also want to improve take-up and encourage more people to make private provision. On Second Reading, I said that the growth in private provision had been underpinned by the basic state pension and SERPS. Unfortunately, when I re-read my speech today, I realised that Hansard had reported "undermined" rather than "underpinned". I now have an opportunity to put that right.
Many pensions commentators doubt whether there will be more private pension provision as a result of the measures. The state second pension is horrendously complicated. It has three different rates of accrual. I hope that the Government achieve their aim of informing all pensioners and people who contribute to the schemes about the exact pension that they are likely to receive when they retire. I wish them luck with that. It will be difficult, but if people do not understand the sort of schemes to which they contribute, it is doubtful whether the provisions will stand the test of time.
There is still an opportunity to improve the Bill. It would be greatly improved if the Government decided to do more to uprate the basic state pension. That would help the other provisions in the Bill.

1 am

Mr. Leigh: In summary, I oppose the Bill because its Child Support Agency provisions are too inflexible and its pension provisions undermine the contributory principle.

Question put and agreed to.

Bill accordingly read the Third time, and passed, with amendments.

Orders of the Day — AID SYSTEM FOR FLAX AND HEMP

Motion made and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees,
That this House takes note of European Union Document No. 12992/99, a draft Council Regulation on the reform of the flax and hemp support regime; and supports the Government's aim of promoting reform of this sector, whilst ensuring that the changes to the regime do not prejudice the future viability of the UK industry.—[Mr. McNulty.]

Question agreed to.

Orders of the Day — NORTHERN IRELAND GRAND COMMITTEE

Ordered,

That—

(1) the matter of the state of Northern Ireland agriculture, being a matter relating exclusively to Northern Ireland, be referred to the Northern Ireland Grand Committee;
(2) the Committee shall meet at Westminster on Thursday 13th April at 2.30 p.m.: and
(3) at that meeting—

(a) the Committee shall take questions for oral answer; and shall then consider the matter of the state of Northern Ireland agriculture, referred to it under paragraph (1) above;
(b) the Chairman shall interrupt proceedings at 5 p.m.; and
(c) at the conclusion of those proceedings a motion for the adjournment of the Committee may be moved by a Minister of the Crown pursuant to Standing Order No. 116(5) (Northern Ireland Grand Committee (sittings)).—[Mr. McNulty.]

Orders of the Day — COMMITTEES

Mr. Deputy Speaker (Sir Alan Haselhurst): With permission, I shall put together the motions relating to Committees.

AGRICULTURE

Ordered,

That Ms Fiona Jones be discharged from the Agriculture Committee and Dr. George Turner be added to the Committee.

NORTHERN IRELAND AFFAIRS

That Mr. Tony Mc Walter be discharged from the Northern Ireland Affairs Committee and Mr. Colin Burgon be added to the Committee.—[Mr. Clive Betts, on behalf of the Committee of Selection.]

Residential Homes

Motion made, and Question proposed, That this House do now adjourn.—[Mr. McNulty.]

Mr. Tony McWalter: The debate, which is about the treatment of the elderly in residential homes, concerns how we should safeguard the human rights of the elderly. Those of us born in England might well be tempted to think of old age as Shakespeare thought of it. In "As You Like It", Jaques, famously, makes the seven ages speech, which starts with the infant "mewling and puking"—like many Members of the House, perhaps—and ends with the seventh age:

Last scene of all,
That ends this strange eventful history,
Is second childishness, and mere oblivion,
Sans teeth, sans eyes, sans taste, sans everything.

Despite its powerful hold on our cultural consciousness, Shakespeare's seventh age is not true to old age for most elderly people: it is not simply that, in modern times, dentistry has made it possible to keep one's teeth, but that modern medicine extends the prospect of full and joyful old age, with those of advanced years keeping active, sociable and intellectually lively until severe illness or accident takes them to the destination that we all share.
Although in the past old persons were thought to lose their marbles, we now know that certain illnesses make us lose mental capacity, and the majority of the population do not have the disposition to get those illnesses. Shakespeare may have been right about the seventh age in his day, though even then the speech was directed inappropriately, but in our planning for the care of the elderly we think much more in terms of how to facilitate an active and sociable life, which is what we ought to do.
Today's newspapers feature 93-year-old Jim Dowd, who works for Sainsbury's, helping to collect trolleys and keep them available for customers. While his life style might not be typical, he provides a clear example of how important it is that ageist attitudes do not deny our fellow human beings who have aspirations the possibility of realising them. It might have been less poetic for Shakespeare to say that, for most people, old age brings a capacity actively to continue to enjoy life, albeit at a slower pace, but it would have been more truthful.
I chose the treatment of the elderly in residential homes as my topic because of my disquiet at how elderly persons are being treated at such a home in my constituency. There are in my area manifestations of what I can call the Shakespearean attitude to the elderly and I want to enlist the Government's help to combat them. Gadebury residential home is owned by Hertfordshire county council. Following privatisation by the Conservative council in 1993, the contract for care for 31 such homes was awarded to an organisation called Quantum Care.
Quantum proceeded to refurbish 29 homes, but two, including Gadebury, were left to go downhill for five years. Then, Quantum announced that it would "cost a fortune" to do up the two homes. At the end of January, Hertfordshire county council announced that Gadebury would be closed in July 2000. Since then, there has been an exodus of staff and residents, and the decision is now irreversible.
I am aware of the Government's determination to ensure that our elderly population are treated with more respect than they have been hitherto. The case of Gadebury echoes the treatment of council house tenants in what many of us who grew up in such houses regard as the bad old days. Council house tenants used to be strongly reminded that they were merely tenants, and that their hold on their homes was provisional. When their families had grown up, they could be relocated to a smaller dwelling, even though that meant selling the furniture, not being allowed to have a pet, having insufficient space for grandchildren to visit, and losing the garden and facilities that many of them had worked hard all their lives to build up.
We rightly decided that such a system was unjust. Under-occupancy of a council house may make housing managers lose sleep, but the first imperative of housing management is to recognise the right of good citizens who pay their bills to continued enjoyment of their home.
That change in managerial style was welcome, but it has not been extended to the elderly. I did not encounter one person in Gadebury who wanted to be relocated. Furthermore, there was a strong ethos at Gadebury, which conformed to many of the Government's ideas on care for the elderly. The home was primarily residential, but if residents needed nursing care it could be provided without an enforced move. One floor of the home tended to be for those who were frailer than the others, and whose need for nursing care was more pronounced. At Gadebury, those employed by the health service, the care agency and the county's social services team worked closely together. The Berlin wall that was described so ably by the previous Secretary of State for Health, my right hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson), had been broken down sufficiently for quarrels about funding and resources to be minimised.
I am happy to commend Hertfordshire county council and the West Hertfordshire health authority for the way in which they have jointly delivered on co-operative programmes of care—in some cases well in advance of governmental initiatives. It is clear that such arrangements are fragile if the threat of closure hangs over a place where such good practice is achieved.
Why was Gadebury served with a notice of closure? The crucial point is that, in the deal that Hertfordshire county council made when it privatised care, there was never any commitment to keep it open, even though it was only built in the late 1960s. Such privatisations often have unacceptable secret clauses and undisclosed understandings. The announcement of closure at Gadebury came as a complete shock to staff and residents at the home, but county council officers had known for more than five years that the plan was to close it. Such secrecy cannot be right. It undermines confidence in any other assurances that council officers may make. The elderly and their relatives and carers were still accepting places at the home in late 1999, even though those responsible for the home knew that it was destined for the chop.
After Gadebury had been neglected for five years, some running repairs that could have been phased over time had built up, and some said that the building needed rewiring and a new heating system. Work on such replacement systems is usually phased, but when there is an


undisclosed determination to close a building dating back years, the phased improvement in such systems is not undertaken.
Why did Hertfordshire county council and Quantum Care decide not to invest in Gadebury, especially as it offered a high standard of care that was, in some ways, a model? I am forced to the sad view that it was because the site, which is close to the town centre, is worth a fortune and the county council wanted to asset strip once the initial furore about privatisation of care had quietened down.
The high price of land in Hemel Hempstead brings about many difficulties. As an example, I cite the 65 persons who have used a temporary homelessness provision supplied by local churches over three months around Christmas. That period is now over, and there is now no provision for the homeless in Hemel Hempstead.
With the closure of Gadebury, residents of the home on public land close to the town centre will be cleared and the land asset disposed of. If Hertfordshire county council's first obligation is to ensure that public assets address public needs, its first duty should be to inform itself of the needs that the land asset may be used to address.
I have given what I believe to be the main reason why Hertfordshire county council has connived at a policy that has caused real distress to my constituents. There is, however, a particularly disturbing dimension to the argument. Certain county councillors say that the Gadebury home is to be closed because the Government have produced guidelines, in a paper entitled "Fit for the Future?", that necessitate closure. Gadebury does not afford its residents rooms that measure 10 sq m, and that is what the paper enjoins.
I know that my hon. Friend the Minister will confirm that "Fit for the Future?" is not law, and, indeed, that those who inspect existing homes in future will consider the overall standard of care that such homes provide. If Gadebury did not have rooms measuring 10 sq m per resident, it did have the most precious attribute that any such home can have: it was regarded by those who lived there as a home, and it was organised in such a way that it could be a home for most residents for life, however frail they might become.
The home had a joyful atmosphere, and if the facilities were not the most modern, they were sufficient to produce a quality of life to which, in new legislation, we aspire. I hope that my hon. Friend will confirm that, whatever changes the Government make, when inspectors see good-quality provision of the sort that Gadebury had, their brief will be not to close such homes, but to commend them.
I have four concerns. First, the Government are rightly worried about the standards in care homes; indeed, they are the subject of a Bill being considered in another place. However, the biggest issue for residents in such homes, when they are enjoying their place of abode, is the feeling of security engendered by their belief that they will be able to continue to live there. When a home is well organised and staffed in a friendly way, and when it has the capacity to cope with those who become progressively more frail—that applied to Gadebury—residents believe, very reasonably, that they will probably be able to end their days there. The secretive actions of Hertfordshire county council and Quantum Care violated the reasonable expectations of the Gadebury residents.
Summary decisions of that sort, made with no reference to the views of residents, their families and their carers and with no reference to those working in such homes, constitute a violation of the rights of such persons. I ask the Government to ensure that, in future, residents in homes throughout the country will not be subjected to circumstances in which they feel vulnerable to decisions summarily to close such homes.
Secondly, Hertfordshire county council has decided to dispose of an asset that is of considerable value, but could also be used for a variety of socially beneficial purposes, whether for the establishment of new extended care provision for the elderly—in which Hertfordshire is a pioneer—or for other purposes. I am thinking of, for instance, people who are homeless, mentally frail, or both.
I should like the Minister to see such disposal as akin to selling off a school playing field. Such sites are being transmuted from being community resources to being simply private assets. Perhaps the Minister could consider whether he should have the power to call in such asset disposals above a certain value. That is particularly an issue when there is not a unitary local authority. Socially beneficial projects that the borough council might have in mind are not considered by the county council, which has a more focused brief.
Thirdly, Hertfordshire county council's decision was based on the grinding of a political axe. Members were given a figure for the refurbishment of Gadebury which included a large sum relating to compliance with new Government regulations, as articulated in "Fit for the Future?". In doing that, the county council has tried to transfer responsibility for closure to central Government. I ask the Minister to confirm that, as he has said in the past, the remit of the National Care Standards Commission will not be to close homes that work well, even if their rooms are not spacious, and that the commission will have regard to the general level of amenities in and about the environs of a home when it makes a judgment about whether care should continue to be given at such a place.
Fourthly, I ask that consideration be given to the grief caused by the break-up of friendships, the distress caused by unnecessary discontinuities in caring provision, and the bewilderment caused to elderly people when they have to go through an unnecessary uprooting.
As we have yet to act on the Sutherland report, many such elderly people have lost their savings, the family home and their access to friendly neighbours. When government or other agencies consider the closure of a home, they should recognise that they are dealing with persons who have already endured trauma. Although sometimes the closure of a home cannot be avoided—there is such a home not far from Gadebury, but it is not the subject of this debate, as it is falling down and its closure is necessary—I hope that the Government will exercise strongly their powers to prevent unnecessary home closures.
In a recent Adjournment debate, my hon. Friend the Member for Wakefield (Mr. Hinchliffe) said that local authorities should act like the Official Receiver in the case of home closures, so that there is a back-stop to prevent unnecessary distress of the type that famously caused eight deaths within a fortnight because of a relocation to Barnet.
In the Gadebury case, the local authority, in the shape of Hertfordshire county council, is itself responsible for causing unnecessary distress to residents and erstwhile residents. However, the failures by a local authority to discharge a function are a different order of problem from the current situation, which is that no body is acting to underpin the security of tenancy of those in homes for the elderly.
What knits those concerns together is that the elderly have rights and interests that they, their families and their carers should have the freedom to express. They were denied that freedom in the case of Gadebury, which, prior to the decision to close, treated residents in Shakespearean style as passive recipients of services. Whatever form the seventh age takes, I hope that the Minister will assure the House that he is alive to the need for the human rights of those who are of that age to be taken fully into account.

The Minister of State, Department of Health (Mr. John Hutton): I congratulate my hon. Friend the Member for Hemel Hempstead (Mr. Mc Walter) on choosing the subject of residential care for this debate, and also for the way in which he has spoken up for some vulnerable people in his constituency. How we as a society provide for the care needs of older people is a hugely important subject. We live in an ageing society—which is something to be celebrated—and it is therefore right that we look critically at every aspect of our system of providing long-term care for older people, with a view to improving choice in, and the quality and flexibility of, those care services.
My hon. Friend has expressed a number of specific concerns about the provision of residential care services in his constituency and the proposed closure of Gadebury house, in Hemel Hempstead. I shall try to deal with those concerns later in my speech. I think that it would be helpful if I were, first, briefly to spell out the Government's wider policies on residential care, to explain to my hon. Friend the background and context within which residential care services should be planned and delivered.
My hon. Friend may be aware that there are about 30,000 residential and nursing homes in England, providing a range of services for almost 500,000 people. The vast majority of those homes are now being operated by the independent sector. Less than 20 per cent. of residential homes are operated by local authorities. It is the responsibility of local authorities to plan and to commission a suitable range of services to meet the needs of local communities.
The Government's responsibilities are, first, to set the right policy and legal framework to regulate and improve the quality and standards of care being provided in care homes; secondly, in partnership with employers, to develop the appropriate training necessary for the social care work force; and, thirdly, to provide adequate resources to local authorities to allow them properly to fulfil their social services responsibilities.
As my hon. Friend has acknowledged, the Government have started a major programme of reform and modernisation in all of those three key spheres. Many of the reforms were described in the White Paper,

"Modernising Social Services". Our main ambitions are to improve the quality of social services and the protection afforded to vulnerable people and better to promote the independence of those who need to use those vital public services.
The Care Standards Bill contains many of those proposals, including the establishment of the new independent regulation and inspection arrangements and the introduction for the first time of a proper framework of national standards for care homes. The new National Care Standards Commission, which my hon. Friend mentioned, will take over from health and local authorities the responsibility for registering and inspecting residential and nursing homes, closing the loopholes that exclude many homes from any effective monitoring. For the first time, all local authority-run homes will be subject to independent quality control and monitoring.
The commission will inspect and register homes against a new set of national minimum standards for the first time. National minimum standards should help to ensure that poor standards and shoddy treatment are rooted out for good and that all residents in care homes, irrespective of which part of the country they are in, will be afforded the same protection and access to decent services.
In September last year, the Department began a consultation exercise on a proposed set of standards developed by the Centre for Policy on Ageing. The consultation ended in January and we are considering our response. The Department received 1,400 responses to the consultation on "Fit for the Future?".
We have made it clear that we want the final set of standards to reflect best practice in ensuring a quality care environment for older people. The standards will be realistic and affordable and will give care providers a sensible time in which to make any necessary improvements in the care home. The national minimum standards will, at the least, depend on the new National Care Standards Commission being fully operational, which will not happen before April 2002. Some of the standards, particularly the more challenging ones relating to the physical environment of a care home, will not be introduced until some time after the commission has started its work.
It should be clear that there can be no substance to the claim that the "Fit for the Future?" proposals by themselves provide any justification for the closure of the care home in my hon. Friend's constituency. We have not yet fixed the final set of national standards, and in any case some of them are several years away from being implemented. The effective planning and commissioning role of local authorities is central to the exercise, because they have the main responsibility for ensuring that the social care needs of their communities are properly met. Many of my hon. Friend's comments addressed that issue.
The previous Government's devotion to the privatisation of care provision put dogma before the care needs of service users and threatened the fragmentation of vital care services. However, it is equally true that the near monopoly of local authority provision that used to be a prominent feature of social care frequently led to a "one size fits all" approach, with users being expected to accommodate themselves to the services provided, regardless of their needs and preferences.
We want to put those bogus distinctions and arguments behind us and move on. We want to move the focus away from who provides the care and place it firmly on the


quality of the services experienced by, and the outcomes achieved for, individuals and their carers and families. We do not take a rigid position on whether services should be provided directly by local authorities or by the independent sector. It is the quality of the care provided that counts.
Decisions about the provision of residential care services in Hertfordshire were taken several years ago, as my hon. Friend made clear. That included the decision to transfer the existing residential care homes operated by the county council to Quantum Care, which is a not-for-profit organisation with an excellent reputation for providing quality care to older people.
The role of my Department is to ensure that the local authority has in place proper mechanisms for the effective discharge of its statutory responsibilities and that the people of Hertfordshire receive high-quality social care services.
The social services inspectorate provides a powerful monitoring and inspection role to ensure that both those objectives are met in all parts of the country, including my hon. Friend's constituency, but it is not my Department's role to overrule local decisions made by social services departments or to intervene directly in decisions made by care home providers to continue to operate a particular home.
I understand that Gadebury is closing because it does not meet existing registration standards set by the county council. It is always distressing for residents when a care home closes, so it is enormously important that the upheaval be handled with sensitivity and respect. I understand that every effort is being made to ensure that the residents are found suitable alternative homes that fully meet their choices and care needs.
The new regulatory system will certainly provide stronger powers to monitor the financial viability of homes and will ensure that residents have contracts that clearly spell out their rights—a matter to which my hon. Friend rightly drew attention.
The present situation regarding training is completely unacceptable, as I am sure that my hon. Friend will agree. The social care work force is nearly 1 million strong, but currently 80 per cent. have no formal social care qualifications whatever. The Government have set up a

national training organisation for social care, the training organisation for personal social services—TOPSS—which is developing a national training strategy.
We have substantially increased the training support grant, which is now more than £120 million, to support social care training provision. The Care Standards Bill is also setting up a new general social care council. We are taking urgent action to improve training, which will in turn lead to improved care for those in residential care homes.
Hertfordshire's standard spending assessment for social services is increasing by 5.8 per cent. this year, which represents nearly £165 million and is more than twice the rate of inflation, compared with an average increase of 5.1 per cent. nationally. We are providing record resources to the council to allow it to provide effective social services.
In all the three areas to which I referred at the beginning of my remarks, the Government are taking action to improve the quality of social services, and we will continue to do so, because those vital services can be a powerful force for good, performing crucial functions that are fundamental to any decent and compassionate society; but social services are local services, and it is for local councils ultimately to take responsibility for how the resources are used in the front line.
My hon. Friend raised his genuine concern over the decision to close Gadebury house and transfer the residents elsewhere. I fully understand and respect his concerns, and I will be happy to meet him at any time in the future to discuss them in more detail. I will, in particular, draw his remarks about the sale of local authority assets to my right hon. Friend the Minister for Local Government and the Regions.
I hope that, at the very least, I have been able to persuade my hon. Friend that the Government are determined to strengthen the regulation and inspection of care homes, giving more effective rights to residents such as those at Gadebury to have a better standard of care than has sometimes been the case. I hope that he, in turn, will be able to support the measures to which I have referred and to work with us to provide greater security and peace of mind to all those who need long-term residential care.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past One o'clock.